Interest rates highest in 14 years

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Yesterday, the Bank of England announced they are raising interest rates. This is the seventh consecutive increase as the Bank copes with soaring inflation and rising costs.

Interest rates rose from 1.75% to 2.25%, bringing interest rates to a 14-year high. The central bank also warned the UK could have slipped into a recession, with economic growth slower than expected in July. The economy was previously expected to grow between July and September; however, the Bank of England has now warned that it believes the economy will contract by around 0.1% during this period.

Borrowing costs are currently at their highest level since the 2008 economic crisis. At this point, the global banking system is facing collapse. Inflation is also at its highest level in nearly 40 years, placing severe stress on many people and leaving many facing extreme financial hardship.

What does rising interest rates mean to you?

Interest rates increase. Make it more expensive for everyone to borrow. As a result, many will see their mortgage payments increase. Those using a standard variable rate mortgage will see an average increase of £31 a month, others with a typical track mortgage face an increase of £49 a month. If you’re working on a fixed-price deal, you may not be immediately affected, though watch out for price jumps when the fixed-deal ends.

Why are interest rates increasing?

In short, rising interest rates make borrowing more expensive. The aim is to encourage people to spend less as a result of these increases, and in theory, prices fall due to reduced demand for goods and services.

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