2nd February 2023
The Bank of England has today raised interest rates by 0.5% points to 4%.
Many people will face higher borrowing costs and businesses will face higher loan rates.
If you have a loan or mortgage that charges you a variable interest rate, you might find that the cost of your repayments goes up. If you’re on a fixed rate, you won’t see any change until the end of your fixed period.
The Bank of England interest rates also influence the amount charged on things such as credit cards, bank loans and car loans, so you will also see that the interest will also go up on credit cars and loans.
However, it is not all doom and gloom, if you have savings in a bank account that pays interest, you might see interest rates on your savings go up.
Why does increasing interest rates help lower inflation?
The Bank of England 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.
Raising interest rates helps to control inflation by making it more expensive to borrow money. This encourages people to borrow less and spend less and save more.
To help workout how much interest you will be paying, or how much you could save we would suggest using online calculators, such as The Bank of England ‘borrowing and savings’ calculator.
https://www.bankofengland.co.uk/education/education-resources/borrowing-savings-calculator