The Bank of England has put up interest rates to four per cent - but what does this mean for our money?
Here is a guide to what the changes mean for your mortgage, debts and savings as the base rate increased from 3.5%. Banks and lenders change the interest rates on their savings and borrowing products in line with the base rate.
This means when the base rate goes up, borrowing money becomes more expensive. This is particularly bad for homeowners with a variable rate mortgage - but in some good news, savings rates have gone up.
The base rate stood at just 0.1% in December 2021. The new base rate was decided on Thursday afternoon by the Monetary Policy Committee, who voted by a majority of 7-2 to increase it by 0.5 percentage points, reports The Mirror.
The Bank of England is raising interest rates to try and lower inflation, which is being pushed up by higher energy, food and fuel prices. By raising interest rates, the theory is that households will spend less and this should mean inflation will drop.
Your mortgage
If you have a tracker mortgage, then your mortgage will become more expensive as these types of deals move in line with the base rate. If you're on a standard variable rate (SVR) mortgage, then you'll likely see your rates go up too - but it is down to your lender to pass on any rises.
You'll usually be on an SVR type mortgage deal after your fix or tracker rate ends. Around two million homeowners are on a variable deal right now.
If you have a fixed-rate mortgage, your rates won't change while you're still in your current deal. However, you will likely see your monthly repayments soar when you come to remortgage due to how much rates have risen.
If you're a renter, you may find your landlord decides to increase your rent if their mortgage has risen as a result of the rate hike. For a rolling tenancy, your landlord can't normally increase your rent more than once a year without your agreement.
For a fixed-term tenancy your landlord can only increase the rent if you agree - if you say no, they can put it up after your fixed term ends.
Your debts
The interest rate on most credit cards is variable and will change from time to time anyway. Credit cards are not historically linked to the base rate - but in recent years, some lenders have started to do this.
You should get 30 days’ notice if your interest rate is going up. Check the terms and conditions of your credit card to see what could happen to your rate.
Over the last year, interest rates on credit cards have been getting more expensive due to the cost of borrowing going up. This means if you need to take out a new credit card, the deals on offer today will be worse compared to a year ago.
Interest rates on most personal loans and car financing are normally fixed - but again, most lenders are now advertising higher rates than before.
Your savings
The one positive thing about interest rates going up is that savings rates have slowly been rising. But savings rates are still painfully below the level of inflation - so your money is still being eroded elsewhere.
The best easy-access rate right now is 3.03% on up to £85,000 of savings from Kroo, or Yorkshire Building Society pays 3.35% but only on up to £5,000.
You might be able to beat these rates depending on who you bank with. For example, the Barclays Rainy Day Saver offers 5.12%, the Nationwide FlexDirect current account pays 5% and the Santander Edge Saver is 4%.
Fixed accounts pay more but the rate you get in interest won't go up if there are future Bank of England base rate rises.
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