Interest rates affect the ‘price’ you can borrow money at and how much you earn if you save it.
Although the exact interest rates for various things like credit cards or mortgages are up to the individual lenders, they are affected by the ‘base rate’ set by the Bank of England.
Interest and interest rates explained.
For the past six years, the UK interest rate has remained at 0.50%, however, it is anticipated that this will rise in the medium-to-long term, with even the smallest of increases likely to affect everyone’s personal finances.
With an anticipated rise gradual over several years, interest rates rises will affect you one way or another, with those already struggling financially are anticipated to bear the greatest impact. However, with proper planning and preparation, you can ensure this does not affect your ability to manage your money.
Understand your monthly budget inside and out. Using various budget calculators, assess your finances on a regular basis and test how an interest rate increase may affect your finances.
If you already have an asset such as a house or a car on a high interest scheme, you may wish to consider switching to a lower-cost alternative.
However, it’s not all doom and gloom. If you have savings, a rise in interest rates will mean you benefit from a greater annual interest return on your investment.
The following tools are available to help you budget:
has a budgeting tool which helps you list all your household income and expenditure, and helps you to prioritise your debts.
has useful guides and resources such as calculators, comparison tables, letter templates and more to help you with many different areas.
offer a confidential free online debt advice service through their My Money Steps website, helping you to create a personal action plan to manage your money.
provide a benefits calculator for older people. Use this to make sure you are receiving all the help you are entitled to.
also provide a money management course, providing a simple way to teach people how to build their budgeting skills.
Or take our budgeting and saving financial education modules below to see where you could make changes to improve your budgeting and saving skills.