The Bank of England has raised the interest rate from 0.5% to 0.75% – the first rise since 2009.
Given that length of time, it’s unlikely that you’ve missed the news, but do you know what this rise means for your own finances and how to make the most of the Bank of England’s decision?
Your borrowing may cost more
If you’re considering applying for any other sort of borrowing, you’ll want to get your application in early. With the interest rate rising, it’s almost certain that lenders will be passing those extra costs on to customers.
Credit cards, loans, and even mortgages – if you pay back with interest, you’ll be paying back even more after this interest rate rise.
For instance, Nationwide Building Society has suggested that if you have a £200,000 standard variable rate (SVR) mortgage, you’ll end up paying out an extra £299 a year. If you do have an SVR mortgage, it’s worth looking at moving to a fixed-rate variable mortgage; one that won’t fluctuate over time.
Savers could – technically – benefit
Savers are the group most likely to celebrate the interest rate increase. As it stands, for every £1,000 you have stashed away in savings, you stand to earn an additional £25 a year – which might not sound like much, but it certainly adds up.
More to the point, interest rates for most savings accounts are drastically low these days, so any extra dosh is likely to be welcomed.
However, the problem is that some banks don’t always pass those rate rises on to their customers, so even with an increase in interest rates, you might not get anything for it.
And if that’s the case, now’s the perfect time to hunt around for a savings account that will offer you a better deal.