It happened outside Palace Barracks in the town, where MI5 has its Northern Ireland headquarters.

Local people say they heard a big bang just after midnight. There are no reports so far of any injuries.

The blast seems to have been timed to coincide at the precise moment that policing and justice powers devolved from Westminster to Stormont.

Families were spending the night in a local community centre.

Police said the incident was ongoing, and sources said the bomb was taken to the barracks in a hijacked taxi after the cab driver's family was held hostage, the Press Association reported.