Interest rate rises - how they affect us
Interest rates play such a big part of all of our financial wellbeing, but they can also be one of the most confusing to understand.
Depending on your circumstances, the latest round of interest rate rises from the Bank of England could be a big plus, or a sign of more tricky times to come.
In August, the Bank rate, set by the Monetary Policy Committee, rose from 5% to 5.25% - the 14th rise in a row!
But what does this mean for you?
Mortgages
For the 1.4 million households that have a tracker or standard variable rate (SVR) mortgage, higher interest rates usually mean higher monthly payments from as soon as the rate goes up.
However, roughly three-quarters of all mortgage customers currently hold fixed-rate mortgages - which means their payments may not change straight away, but they will have to pay a lot more when they remortgage than if their fixed-rate had ended a year ago.
This article from the BBC has a helpful calculator so you can see how your mortgage may be affected and also what to do if you can’t afford the higher payments.
Credit Cards and Loans
Changes in interest rates can also have an effect on the amount charged for borrowing, such as credit cards and bank loans.
Lenders could decide to put the price of borrowing up (increasing the monthly payments), if they expect interest rates to keep rising in the future.
This guide from Experian explains how it is still possible to borrow interest-free, but you would need to do some research and make sure that going down this route would be the right decision for you.
Savings
Many banks and building societies will usually pass on any rises in interest rates to their customers.
If you are thinking of opening a savings account at the moment, analysts have said it is a good time to shop around for the best deal.
After all, the UK's financial watchdog has warned banks that they will face action if they offer savers interest rates that are lower than they should be.
Fair for You is Here for You
At Fair for You, we understand that managing your finances can be stressful, but we’re here to try and make life easier.
Whether that’s through learning to find out how much debt you have, finding out tips on how to boost your credit score or if you are considering taking out a flexible, affordable loan with us we’re always happy to offer a listening ear and handy hints on how to improve your financial wellbeing.
Please note we’ve used links to external websites. Although we make every effort to ensure these links are accurate, up to date and relevant, Fair for You Enterprise CIC cannot take responsibility for pages maintained by external providers. Views expressed on external sites we link to are not necessarily those of Fair for You Enterprise CIC. If you come across any external links that don’t work, we would be grateful if you could report them to the web content team.
The content of this blog does not constitute personal financial advice, and the views expressed in it are those of the contributor or author, which may not necessarily represent or reflect the views expressed by Fair for You Enterprise CIC.