Following the recent news that interest rates in the UK are increasing for an eleventh consecutive time, you may feel confused or worried – but we’re here to help. In this post, we’ll explain why it’s happened, how it’ll affect you and what PayPlan can do to help you.
Who controls interest rates?
The Bank of England are in charge of raising or lowering interest rates in the UK.
Why have interest rates increased?
The interest rates have been increased in response to inflation (rising prices).
Since COVID restrictions eased worldwide, prices have been increasing due to people spending more. In addition, increased consumer spending has also caused a shortage in the supply of some products, increasing costs further.
The Bank of England are raising interest rates in an attempt to control inflation and stop the speed at which prices are rising. Higher interest rates mean it’ll be more expensive to borrow money, so consumers will be encouraged to borrow less, spend less, and save more.
What does that mean for me?
If you have a tracker or variable-rate mortgage, you will likely see an immediate increase in your monthly payments.
According to the BBC, the increase in interest rates from 4% to 4.25% means an increased monthly payment of:
Typical tracker mortgage – about £24
Standard variable rate mortgage – £15
Loans & Credit cards
Credit cards, bank loans and car loans are some other things that are influenced by interest rates. As a result, lenders may choose to increase prices if they anticipate higher interest rates in the future.
How can PayPlan help?
You can visit BudgetSmart, our free online tool that’ll help you discover ways to maximise your income and save some extra cash.
If you’re worried about your finances or struggling to keep up with debt repayments, remember PayPlan is here to help. You can access our help in a variety of ways including live chat on our website or by freephone on 0800 316 1833 .