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It's been a decade since the last interest rate rise, but what does it mean for you?
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Interest rate rise – what you need to know

You wait a decade for an increase in interest rates and then two come along in a year. But, what does it all mean and how will it affect you if you have a mortgage, are a saver, or about to retire?

What’s happened?

The Bank of England (BoE) has increased what is known as the base rate by 0.25% to 0.75%.

The last time the base rate was increased was in November 2017, which was the first increase for more than a decade.

What does it mean?

Banks, building societies and other lenders do not have to follow Bank of England interest rate decisions. But, it can affect the cost of borrowing and how much you earn on your savings.

Should I worry?

No. But, it’s important to understand how this, and any potential increases in the future, will affect your finances.

However, if you're struggling with existing debt, even a small increase could put an added strain on your finances, so it's important to seek advice as soon as possible.

How an interest rate rise could affect you if…

You have a mortgage

This depends on what kind of mortgage you are on.

If you’re on a variable rate tracker mortgage, which follows the BoE base rate, you will see increases straight away.

Standard variable rate mortgage holders will probably also see an increase, but this is decided by the lender.

If you have a fixed rate mortgage, you are likely to be affected when you reach the end of your current deal.

If you’re unsure what kind of mortgage you’re on, check your paperwork or with your provider to find out how an interest rate will affect you.

You’re a saver

It’s good news for savers. You could see an increase in the interest you are paid on your money in the bank.

After years of low interest rates, banks and building societies might also increase the rates on new savings accounts. This means it’s important to shop around to make sure you’re getting the best deal.

You’re a borrower

Any personal loans you currently have are unlikely to be affected by the interest rate rise. You usually agreed to fixed rate of interest when you took out the loan.

Credit cards and charges on overdrafts are unlikely to go up. But, if they do you will be given notice before this happens.

If you’re thinking about borrowing money in the future, including mortgages, this might be more expensive.

You’re retiring

It could also be good news if you’re about to buy an annuity. An interest rate rise means you’ll get a better rate.

You cannot switch an annuity you have already bought, but you can still benefit from better interest rates by putting the money into a savings account. 

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