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| Version 15 | Version 16 |
|---|---|
| UK interest rates: How will the rise affect you and how high could it go? | UK interest rates: How will the rise affect you and how high could it go? |
| (14 days later) | |
| Interest rates have risen sharply as the Bank of England continues to use its powers to tackle soaring prices. | Interest rates have risen sharply as the Bank of England continues to use its powers to tackle soaring prices. |
| At its November meeting, the Bank increased its benchmark rate from 2.25% to 3%. | |
| That is the eighth consecutive hike since December 2021, pushing the rate to its highest level for 14 years. | |
| It also marks the biggest single increase since 1989, and could have a big impact on the cost of living and people's finances. | It also marks the biggest single increase since 1989, and could have a big impact on the cost of living and people's finances. |
| How high could interest rates go? | How high could interest rates go? |
| The latest rise followed a 0.5 percentage point increase to 2.25% at the previous meeting in September. | |
| Analysts suggest rates could reach 4.75% next year. | Analysts suggest rates could reach 4.75% next year. |
| However, that peak is lower than predictions had suggested a few weeks ago, when the government was in some turmoil after its mini-budget was badly received. | However, that peak is lower than predictions had suggested a few weeks ago, when the government was in some turmoil after its mini-budget was badly received. |
| The Bank's monetary policy committee meets eight times a year to decide interest rate policy. | The Bank's monetary policy committee meets eight times a year to decide interest rate policy. |
| It is under pressure to put rates up because it has a target to keep inflation at 2%, but prices are currently rising at 11.1%, more than five times that level. | |
| Considerable uncertainty remains around the government's economic policy, with a key Autumn Statement due to be delivered by the chancellor on 17 November. | Considerable uncertainty remains around the government's economic policy, with a key Autumn Statement due to be delivered by the chancellor on 17 November. |
| What do we know will be in the Autumn Statement? | |
| How do interest rates affect me? | How do interest rates affect me? |
| Mortgages | Mortgages |
| Just under a third of households have a mortgage, according to the government's English Housing Survey. | Just under a third of households have a mortgage, according to the government's English Housing Survey. |
| After a period of ultra-low rates, many homeowners are now facing the possibility of much more expensive monthly repayments. | After a period of ultra-low rates, many homeowners are now facing the possibility of much more expensive monthly repayments. |
| When interest rates rise, about 1.6 million people on tracker and variable rate deals usually see an immediate increase in their monthly payments. | When interest rates rise, about 1.6 million people on tracker and variable rate deals usually see an immediate increase in their monthly payments. |
| The increase in the Bank rate from 2.25% to 3% means those on a typical tracker mortgage will pay about £73.50 more a month. Those on standard variable rate mortgages face a £46 jump. | The increase in the Bank rate from 2.25% to 3% means those on a typical tracker mortgage will pay about £73.50 more a month. Those on standard variable rate mortgages face a £46 jump. |
| This comes on top of increases following the previous recent rate rises. Compared with pre-December 2021, average tracker mortgage customers will be paying about £284 more a month, and variable mortgage holders about £179 more. | This comes on top of increases following the previous recent rate rises. Compared with pre-December 2021, average tracker mortgage customers will be paying about £284 more a month, and variable mortgage holders about £179 more. |
| Three-quarters of mortgage customers hold a fixed rate mortgage. Their monthly payments may not change immediately, but house buyers - or anyone seeking to remortgage - will have to pay a lot more now than if they had taken out the same mortgage a year ago. | Three-quarters of mortgage customers hold a fixed rate mortgage. Their monthly payments may not change immediately, but house buyers - or anyone seeking to remortgage - will have to pay a lot more now than if they had taken out the same mortgage a year ago. |
| There has been considerable upheaval in this market since September's mini-budget, even though most of the policies that were announced have now been ditched. | There has been considerable upheaval in this market since September's mini-budget, even though most of the policies that were announced have now been ditched. |
| An average two-year fixed deal, which was 2.29% in November 2021, is now 6.47% - a difference of hundreds of pounds each month in repayments for a typical borrower. | An average two-year fixed deal, which was 2.29% in November 2021, is now 6.47% - a difference of hundreds of pounds each month in repayments for a typical borrower. |
| However, there is a possibility that fixed mortgage rates are at their peak for the time-being, and could start to fall. | However, there is a possibility that fixed mortgage rates are at their peak for the time-being, and could start to fall. |
| You can see how your mortgage may be affected by rising rates with our calculator below. | You can see how your mortgage may be affected by rising rates with our calculator below. |
| If you can't see the calculator, click here. | If you can't see the calculator, click here. |
| Credit cards and loans | Credit cards and loans |
| Bank of England interest rates also influence the amount charged on things such as credit cards, bank loans and car loans. | Bank of England interest rates also influence the amount charged on things such as credit cards, bank loans and car loans. |
| Even ahead of the latest decision, the average annual interest rate in September was 20.83% on bank overdrafts and 18.96% on credit cards. | Even ahead of the latest decision, the average annual interest rate in September was 20.83% on bank overdrafts and 18.96% on credit cards. |
| Lenders could decide to put prices up further, in expectation of higher interest rates in the future. | Lenders could decide to put prices up further, in expectation of higher interest rates in the future. |
| Savings | Savings |
| Individual banks and building societies usually pass on interest rate rises to customers. The deals being offered now are better than anything seen for years. | Individual banks and building societies usually pass on interest rate rises to customers. The deals being offered now are better than anything seen for years. |
| But although this means savers get a higher return on their money, interest rates are not keeping up with rising prices. | But although this means savers get a higher return on their money, interest rates are not keeping up with rising prices. |
| This means the value of cash savings is falling in real terms. | This means the value of cash savings is falling in real terms. |
| Why does increasing interest rates help lower inflation? | Why does increasing interest rates help lower inflation? |
| The Bank has been putting rates up to combat rising prices - known as inflation. | The Bank has been putting rates up to combat rising prices - known as inflation. |
| Prices have been going up quickly worldwide, as Covid restrictions eased and consumers spent more. | Prices have been going up quickly worldwide, as Covid restrictions eased and consumers spent more. |
| Many firms have problems getting enough goods to sell. And with more buyers chasing too few goods, prices have increased. | Many firms have problems getting enough goods to sell. And with more buyers chasing too few goods, prices have increased. |
| There has also been a very sharp rise in oil and gas costs - a problem made worse by Russia's invasion of Ukraine. | There has also been a very sharp rise in oil and gas costs - a problem made worse by Russia's invasion of Ukraine. |
| Raising interest rates helps to control inflation by making it more expensive to borrow money. This encourages people to borrow and spend less, and save more. | Raising interest rates helps to control inflation by making it more expensive to borrow money. This encourages people to borrow and spend less, and save more. |
| However, it is a tough balancing act as the Bank does not want to slow the economy too much. The Bank is predicting that the UK could be in recession - a period of economic decline - for two years which is longer than we have seen in comparable statistics. | However, it is a tough balancing act as the Bank does not want to slow the economy too much. The Bank is predicting that the UK could be in recession - a period of economic decline - for two years which is longer than we have seen in comparable statistics. |
| Since the global financial crisis of 2008, UK interest rates have been at historically low levels. Last year saw rates of 0.1%. | Since the global financial crisis of 2008, UK interest rates have been at historically low levels. Last year saw rates of 0.1%. |
| Are other countries raising their interest rates? | Are other countries raising their interest rates? |
| The UK is affected by prices rising across the globe. So there is a limit as to how effective UK interest rate rises will be. | The UK is affected by prices rising across the globe. So there is a limit as to how effective UK interest rate rises will be. |
| However, other countries are taking a similar approach, and have also been raising interest rates. | However, other countries are taking a similar approach, and have also been raising interest rates. |
| The US central bank has announced big rate rises, taking its key rate to the highest level for nearly 15 years. | The US central bank has announced big rate rises, taking its key rate to the highest level for nearly 15 years. |
| Other central banks around the world have also raised rates, as inflation continues to cause problems in a host of major economies. | Other central banks around the world have also raised rates, as inflation continues to cause problems in a host of major economies. |
| How will you be affected by any change to interest rates? Share your experiences by emailing haveyoursay@bbc.co.uk. | How will you be affected by any change to interest rates? Share your experiences by emailing haveyoursay@bbc.co.uk. |
| Please include a contact number if you are willing to speak to a BBC journalist. You can also get in touch in the following ways: | Please include a contact number if you are willing to speak to a BBC journalist. You can also get in touch in the following ways: |
| WhatsApp: +44 7756 165803 | WhatsApp: +44 7756 165803 |
| Tweet: @BBC_HaveYourSay | Tweet: @BBC_HaveYourSay |
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