How will rising interest rates affect you?

The Bank of England's leading interest rate has been at a record low level since 2009

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We're taking a closer look at what happens when interest rates rise and examine the effect this could have on the housing market, investment bonds and how it could eventually strengthen the pound against other currencies

The Bank of England's leading interest rate has been at a record low level since 2009, if they increase the Bank Rate, borrowers on variable rate mortgages will see their repayments rise.

See also: Do you know how much your credit card is costing you?

See also: How to enjoy interest-free spending for two and a half years

This is because variable rate mortgages are loosely linked to Bank Rate.

Borrowers on fixed rates would pay the same as before but fixed rate mortgage deals would go up.

So, if rates rise significantly, the housing market could slow down.

However, savers would benefit as the rates on their deposits should finally improve.

Pensioners buying annuities which pay an income for life should also see rates rise. Investments such as bonds, which pay fixed returns are likely to fall in value.

Some companies' profits grow when interest rates rise, so shareholders could benefit. Banks, for instance, can make more profit by lending savers' cash at higher rates.

If rates rise, the pound could strengthen against other currencies - good news for holiday makers!


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