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| Version 46 | Version 47 |
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| How do interest rates affect me and when will they come down? | How do interest rates affect me and when will they come down? |
| (1 day later) | |
| The Bank of England held interest rates at 5.25% in May, but cuts are expected later in the year. | |
| Interest rates affect mortgage, credit card and savings rates for millions of people across the UK. | Interest rates affect mortgage, credit card and savings rates for millions of people across the UK. |
| What are interest rates and why do they change? | What are interest rates and why do they change? |
| An interest rate tells you how much it costs to borrow money, or the reward for saving it. | An interest rate tells you how much it costs to borrow money, or the reward for saving it. |
| The Bank of England's base rate is what it charges other lenders to borrow money. | |
| This influences what other banks charge their customers for loans such as mortgages, and the interest they pay on savings. | This influences what other banks charge their customers for loans such as mortgages, and the interest they pay on savings. |
| The Bank of England moves rates up and down in order to control UK inflation - the increase in the price of something over time. | The Bank of England moves rates up and down in order to control UK inflation - the increase in the price of something over time. |
| When inflation is high, the Bank - which has a target to keep inflation at 2%- may decide to raise rates. | |
| The idea is to encourage people to spend less, to help bring inflation down by reducing demand. | The idea is to encourage people to spend less, to help bring inflation down by reducing demand. |
| Once this starts to happen, the Bank may hold rates, or cut them. | Once this starts to happen, the Bank may hold rates, or cut them. |
| When will UK interest rates go down? | |
| The Bank rate is currently at its highest level for 16 years. | |
| However, it was higher than this for much of the 1980s and 1990s, and was 17% in November 1979. | |
| There have been questions about why interest rates have not been cut, with inflation dropping sharply. | |
| Inflation was at 3.2% in March - down from a peak of 11.1% in October 2022. Further falls are expected. | |
| Following May's decision to keep interest rates at 5.25%, the Bank's governor Andrew Bailey said he was "optimistic that things are moving in the right direction". | |
| But he said the Bank needed to "see more evidence" that price rises had slowed further before cutting interest rates. | |
| It left open the possibility of an interest rate cut in June, after two sets of new figures for inflation and wages are published. However, a cut later in the summer is considered more likely. | |
| The Bank has to balance the need to slow price rises against the risk of damaging the economy - which has shown little sign of growth. | |
| Bank optimistic 'things moving in right direction' | |
| 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. |
| When interest rates rise or fall, more than 1.2 million people on tracker and standard variable rate (SVR) deals usually see an immediate change in their payments. | When interest rates rise or fall, more than 1.2 million people on tracker and standard variable rate (SVR) deals usually see an immediate change in their payments. |
| More than eight in 10 mortgage customers have fixed-rate deals. While their monthly payments aren't immediately affected, any future deals are. | More than eight in 10 mortgage customers have fixed-rate deals. While their monthly payments aren't immediately affected, any future deals are. |
| Mortgage rates are much higher than they have been for much of the past decade. | Mortgage rates are much higher than they have been for much of the past decade. |
| This means homebuyers and those remortgaging have to pay a lot more than if they had borrowed the same amount a few years ago. | This means homebuyers and those remortgaging have to pay a lot more than if they had borrowed the same amount a few years ago. |
| About 1.6 million deals will expire in 2024, according to banking trade body UK Finance. | About 1.6 million deals will expire in 2024, according to banking trade body UK Finance. |
| You can see how your mortgage may be affected by interest rate changes by using our calculator: | You can see how your mortgage may be affected by interest rate changes by using our calculator: |
| If you can't see the calculator, click here. | If you can't see the calculator, click here. |
| Why mortgage rates are going up not down | Why mortgage rates are going up not down |
| Five ways to save money on your mortgage | Five ways to save money on your mortgage |
| Credit cards and loans | Credit 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. |
| Lenders could decide to put their rates up if they expect higher interest rates from the Bank of England. However, if rates fall, interest payments may get cheaper. | Lenders could decide to put their rates up if they expect higher interest rates from the Bank of England. However, if rates fall, interest payments may get cheaper. |
| Low interest rates are good for borrowers, but bad for savers | Low interest rates are good for borrowers, but bad for savers |
| Savings | Savings |
| The Bank of England interest rate also affects how much savers can earn on their money. | The Bank of England interest rate also affects how much savers can earn on their money. |
| Individual banks and building societies have been under pressure to pass on higher interest rates to customers. | Individual banks and building societies have been under pressure to pass on higher interest rates to customers. |
| There are some good deals on the market and experts say customers should shop around, as money may be in accounts paying little or no interest. | There are some good deals on the market and experts say customers should shop around, as money may be in accounts paying little or no interest. |
| The UK's financial watchdog warned banks will face "robust action" if they offer unjustifiably low savings rates to customers. | The UK's financial watchdog warned banks will face "robust action" if they offer unjustifiably low savings rates to customers. |
| Are other countries raising their interest rates? | Are other countries raising their interest rates? |
| Interest rates have been increasing across the world over the past few years. | |
| However, in recent months, other central banks - including the US Federal Reserve and the European Central Bank - have also paused their rate rises, with the next moves expected to be downwards. | |
| The UK has had one of the highest interest rates in the G7 - the group representing the world's seven largest so-called "advanced" economies. | The UK has had one of the highest interest rates in the G7 - the group representing the world's seven largest so-called "advanced" economies. |
| Related Topics | Related Topics |
| Savings | Savings |
| Money | Money |
| Personal finance | Personal finance |
| Cost of Living | Cost of Living |
| UK economy | UK economy |
| Bank of England | Bank of England |
| Mortgages | Mortgages |