This article is from the source 'bbc' and was first published or seen on . The next check for changes will be

You can find the current article at its original source at https://www.bbc.co.uk/news/business-57764601

The article has changed 71 times. There is an RSS feed of changes available.

Version 28 Version 29
Interest rates: How a rise affects you and your money Interest rates: How a rise affects you and your money
(6 days later)
The Bank of England has put up interest rates 14 times in a row in an attempt to slow rising prices. The Bank of England has put up interest rates 14 times in a row, in an attempt to slow rising prices.
In August, the Bank rate, set by the Monetary Policy Committee, went up to 5.25% from 5%.In August, the Bank rate, set by the Monetary Policy Committee, went up to 5.25% from 5%.
That means further pain for some homeowners, but is better news for savers.That means further pain for some homeowners, but is better news for savers.
How high could interest rates go?How high could interest rates go?
The Bank rate is currently at its highest level for 15 years.The Bank rate is currently at its highest level for 15 years.
The theory is that raising interest rates makes it more expensive to borrow money, meaning people have less to spend, reducing demand and inflation.The theory is that raising interest rates makes it more expensive to borrow money, meaning people have less to spend, reducing demand and inflation.
The Bank has put up rates 14 consecutive times since December 2021 to try to bring inflation closer to its target of 2%. Rates have risen 14 consecutive times since December 2021 as the Bank tries to bring inflation closer to its target of 2%.
But, so far, the impact has been limited and is likely to take more time to feed through. But, so far, the impact has been limited.
Prices rose by 7.9% in the year to June, according to the Office for National Statistics (ONS). This was lower than 8.7% in the year to May, and down from the peak of 11.1% in October 2022. Prices rose by 6.8% in the year to July, according to the Office for National Statistics (ONS). This was lower than 7.9% in the year to June, and down from the peak of 11.1% in October 2022.
However, that is still almost four times the Bank's 2% target. However, that is still more than three times the Bank's 2% target.
Concerns also remain over the "core inflation" rate - a measure which strips out volatile factors such as food and energy. Although it dipped slightly in June, it is still relatively high. Concerns also remain over the "core inflation" rate - a measure which strips out volatile factors such as food and energy. It was unchanged in July at 6.9%, which is also relatively high.
As a result, there is uncertainty about what will happen in the coming months, although financial markets now think rates won't rise as high as previously thought. As a result, there is uncertainty about what will happen in the coming months, although financial markets think rates might be close to their peak.
At one point, UK rates were expected to rise above 6%, but now markets expect the peak rate to be below 6%. At one point, UK rates were expected to rise above 6%, but now many experts expect the peak rate to be below 6%.
The Bank has to balance the risk of damaging the economy, which has shown little sign of growth, with the need to slow price rises.The Bank has to balance the risk of damaging the economy, which has shown little sign of growth, with the need to slow price rises.
Its Monetary Policy Committee meets eight times a year to decide rates.Its Monetary Policy Committee meets eight times a year to decide rates.
Why does the Bank of England change interest rates?Why does the Bank of England change interest rates?
How do interest rates affect me?How do interest rates affect me?
MortgagesMortgages
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.
When interest rates rise, more than 1.4 million people on tracker and standard variable rate (SVR) deals usually see an immediate increase in their monthly payments.When interest rates rise, more than 1.4 million people on tracker and standard variable rate (SVR) deals usually see an immediate increase in their monthly payments.
The rise from 5% to 5.25% means those on a typical tracker mortgage would pay about £24 more a month. Those on SVR mortgages would face a £15 jump. The rise from 5% to 5.25% means those on a typical tracker mortgage will pay about £24 more a month. Those on SVR mortgages face a £15 jump.
Around three-quarters of mortgage customers hold fixed-rate deals.Around three-quarters of mortgage customers hold fixed-rate deals.
Their monthly payments may not change immediately, but higher interest rates mean housebuyers - or the 1.8 million people expected to remortgage this year - will have to pay a lot more than if they had taken out the same mortgage a year or more ago. Their monthly payments may not change immediately, but higher interest rates mean house buyers - and the 1.8 million people expected to remortgage this year - will have to pay a lot more than if they had taken out the same mortgage a year or more ago.
The so-called "mortgage bomb" has become a huge economic and political issue. This so-called "mortgage bomb" has become a huge economic and political issue.
As people roll off cheap fixed-rate deals onto products with much higher rates, their monthly repayments can soar by hundreds of pounds. As people roll off cheap fixed-rate deals onto products with much higher rates, monthly repayments can soar by hundreds of pounds.
The IFS, a politically independent think tank, warns rising interest rates could mean 1.4 million mortgage holders see their disposable income fall by more than 20%.The IFS, a politically independent think tank, warns rising interest rates could mean 1.4 million mortgage holders see their disposable income fall by more than 20%.
You can see how your mortgage may be affected by rising rates with our calculator:You can see how your mortgage may be affected by rising rates with our calculator:
If you can't see the calculator, click here.If you can't see the calculator, click here.
What happens if I can't afford to pay my mortgage?
Credit cards and loansCredit cards and loans
Bank of England interest rates also influence the amount charged on credit cards, bank loans and car loans.Bank of England interest rates also influence the amount charged on credit cards, bank loans and car loans.
But even in April the average annual interest rate was 21.86% on bank overdrafts and 20.13% on credit cards. The latest Bank statistics show that in June, the average annual interest rate was 21.77% on bank overdrafts and 20.42% on credit cards, broadly similar to the figures for May. The average rate for personal loans was 8.41%, up from 8.27% in May.
Lenders could decide to put prices up further, if they expect higher interest rates in the future. Lenders could decide to put prices up, if they expect higher interest rates in the future.
Low interest rates are good for borrowers, but bad for saversLow interest rates are good for borrowers, but bad for savers
SavingsSavings
Individual banks and building societies usually pass on interest rate rises to customers.Individual banks and building societies usually pass on interest rate rises to customers.
There are some good deals on the market, so analysts say that customers should shop around, as many will be on accounts paying little or nothing.There are some good deals on the market, so analysts say that customers should shop around, as many will be on accounts paying little or nothing.
The UK's financial watchdog recently warned that banks will face "robust action" if they offer unjustifiably low savings rates to their customers. The UK's financial watchdog has warned that banks will face "robust action" if they offer unjustifiably low savings rates to their customers.
Although many saving accounts are paying more, even the best interest rates aren't keeping up with inflation.Although many saving accounts are paying more, even the best interest rates aren't keeping up with inflation.
This means the value of cash savings - its buying power - is falling in real terms.This means the value of cash savings - its buying power - is falling in real terms.
Why have prices been going up?Why have prices been going up?
Inflation has gone up worldwide, after Covid restrictions eased and consumers spent more.Inflation has gone up worldwide, after Covid restrictions eased and consumers spent more.
Many firms experienced problems getting enough goods to sell. Oil and gas costs were also higher than they had been - a problem made worse by Russia's invasion of Ukraine.Many firms experienced problems getting enough goods to sell. Oil and gas costs were also higher than they had been - a problem made worse by Russia's invasion of Ukraine.
Although many elements of inflation are global, there are also domestic factors at play in the UK, including rising wages.Although many elements of inflation are global, there are also domestic factors at play in the UK, including rising wages.
Are other countries raising their interest rates?Are other countries raising their interest rates?
Interest rates have been increasing across the world in recent months.Interest rates have been increasing across the world in recent months.
However, the UK now has the highest rates in the G7 - a group of the world's seven largest so-called "advanced" economies. However, after the August increase, the UK has the highest rates in the G7 - a group of the world's seven largest so-called "advanced" economies.
That's higher than Canada, France, Germany, Italy, Japan and the US.That's higher than Canada, France, Germany, Italy, Japan and the US.
How does the UK economy compare to other countries?
Related TopicsRelated Topics
SavingsSavings
MoneyMoney
Personal financePersonal finance
Cost of livingCost of living
UK economyUK economy
Bank of EnglandBank of England
MortgagesMortgages