Members of the Bank's Monetary Policy Committee (MPC) voted for a 0.25 percentage point rise as they try to lower stubbornly high inflation.
Here, Which? takes a look at what yet another increase could mean for homeowners and savers.
Bank of England raises base rate to 4.5%
The MPC has voted by a majority of 7-2 to increase the base rate by 0.25 percentage points.
The current rate base is a far cry from the historic lows of December 2021, when it stood at just 0.1%.
The graph below shows how the base rate has changed since July 2008, using data from the Bank of England.
The Bank of England anticipates inflation will 'fall quickly' this year and its 2% target will be met in late 2024. As it stands, however, inflation has proved stubborn - lingering around the 10% mark since last summer.
The Bank admits it will take longer for inflation to fall due to food prices remaining elevated.
Find out more:Why does the base rate matter?
When the Bank of England lends money to commercial banks, the amount of interest they must pay back is determined by the base rate.
A higher base rate means lenders are charged more, and these costs are usually passed on to customers in the form of interest rate rises.
Theoretically, a higher base rate should mean mortgages get more expensive and savings accounts pay more interest on your money, but that isn't always the case.
Find out more:Will this be the last base rate increase?
The latest rise had been anticipated by experts for weeks, but what happens in the future is open for debate.
There is widespread belief that the base rate is near its peak and will begin to head in the opposite direction, but economists are split on when that will be. Some suggest the rate will fall next month, while others believe we could see yet more increases in the coming months.
Ellie Henderson, from Investec Economics, said: 'What is clear is that the days of successive interest rate hikes in this economic cycle are limited, but the exact endpoint is clouded with uncertainties.'
Results of the next meeting will be published on Thursday 22 June.
What does the base rate rise mean for my mortgage?
If you've got a fixed-rate deal, you won't be immediately affected by the base rate change and will instead continue to pay the same amount until the end of your fixed term.
The graph below shows the relationship between base rate changes and mortgage rates for two and five-year fixes, using data from Moneyfacts.
Tracker, discount and standard variable rate mortgages
Repayments on discount mortgages won't go up automatically due to the base rate rise, but there's a good chance your lender will increase its SVR by some or all of the rise in the coming days or weeks.
Find out more:How will your mortgage payments be affected?
Higher rates will also have an impact on renters, as buy-to-let landlords will likely pass on increased costs to their tenants.
Find out more:What does the base rate rise mean for savings?
In theory, the base rate rise should lead to better interest rates on savings accounts. However, there's no guarantee your provider will pass on the latest increase – at least not immediately.
If you're thinking of switching to get a better rate, now is a good time to shop around to see what deals are available and whether you can take advantage of increased competition in the market.
Rachel Springall, finance expert at Moneyfacts, said: 'Challenger banks and building societies are currently paying some of the best returns, so it is always worth considering the more unfamiliar brands that have the same deposit protections in place as a big high street bank.'
Find out more:'Banks must do more to encourage saving'
Banks have been urged to do more to encourage saving, yet some of the biggest names are still only offering around 0.7% interest on instant access Isa and savings accounts.
This week, the Treasury Committee called on banks to increase their savings rates.
Committee chair Harriett Baldwin MP said: 'The UK’s biggest banks are continuing to squeeze record profits from their loyal savers. In a high interest rate environment banks must do more to encourage saving.'
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