Beautiful Virgin Islands

Sunday, Aug 02, 2026

How would an interest rate rise affect you?

How would an interest rate rise affect you?

Everyone in the UK will be affected by rising prices - from a higher gas bill, to harder choices during the grocery shop.

The idea of raising interest rates is to keep those current and predicted price rises, measured by the rate of inflation, under control.

Higher interest rates make borrowing more expensive. For households, that could mean higher mortgage costs, although - for the vast majority of homeowners - the impact is not immediate, and some will escape it entirely.

Analysts are also warning that the potential benefit of a better return on savings could be muted.

Homeowner impact


Even before any decision is made by the Bank of England's rate-setting Monetary Policy Committee, there are signs that the era of ultra-low mortgage rates is at an end.

Some lenders have already started to raise rates for those applying for a new home loan.

It has been an extraordinary period of cheap mortgages, and - in the last few months - there have even been good deals for first-time buyers unable to offer much of a deposit.

Brokers are expecting any rises in mortgage rates to be "slow and measured", which would mean mortgages would stay cheap by historical standards for some time.


It is a little-discussed fact that only about a third of adults have a mortgage.

About a third rent their home, another third have either never had a mortgage or have paid it off. Those figures come from the English Housing Survey, which is geographically limited, but one of the most comprehensive guides available.

Some 74% of mortgage holders in the UK are on fixed-rate deals, so would only see a change in their repayments when their current term ends, according to banking trade body UK Finance.

Of the remainder, 850,000 homeowners are on tracker deals, and the other 1.1 million are on standard variable rates (SVRs). They are the people likely to feel an immediate impact were the Bank rate to rise.

If their rates mirrored a Bank rate rise to 0.25% from its current level of 0.1%, then a typical tracker mortgage customer's monthly repayment would go up by £15.45. The typical SVR customer would be paying £9.58 more a month, UK Finance figures show.

If there were a much bigger Bank rate rise to 1%, and lenders raised their rates by the equivalent amount, then the average tracker customer would pay £93 a month more, and the typical SVR customer would pay £57 a month more.

That would be a further squeeze on their household budget at a time when people have been used to years of cheap borrowing and relatively slow-rising prices.

Every mortgage applicant since 2014 would have needed to prove in stress test that they can pay at a rate of about 6% or 7% - the idea being that a small rate rise may be uncomfortable, but not unmanageable, for homeowners.

Katie Brain, from independent analysts Defaqto, says rates "had to start going back up at some point" but reminds anyone looking for a mortgage that any benefits of a low-rate deal could be wiped out if the applicant ignores expensive fees.

Time to save?


A collective sigh of relief would be heard from savers were interest rates to rise, but it could quickly be followed by a sharp intake of breath.

Analysts warn that, even if the Bank rate rises, there is no guarantee of that being reflected in better returns on savings.


Savers are often borrowers too, but the money in the bank has effectively been falling in value for some time.

Anna Bowes, of website Savings Champion, says that rates have been falling in the last year, even though the Bank of England's base rate was unchanged.

People are receiving pennies in interest for every £100 they keep in savings for a year. A Bank rate rise will do little to change that scenario.

The average interest rate for an easy-access account you can open today is 0.14%. For easy-access accounts closed to new customers, it is 0.22%.

The highest paying easy-access account has an interest rate of 0.66%.

Sarah Coles, from investment firm Hargreaves Lansdown, says many savers have switched off from paying much attention to their returns.

"When we asked people whether they knew what they were earning on their savings, two in five admitted they had no idea," she says.

"Even those who think they have a handle on their savings may well be off the mark. When we asked people what they were making on their easy access savings, most of them wildly overestimated."

Newsletter

Related Articles

Beautiful Virgin Islands
0:00
0:00
Close
Finland Deploys Commercial-Scale Thermal Batteries Using Crushed Rock to Store Renewable Grid Energy
Valued at $109 Million: F-35B Fighter Jet Crashes in Southern California
Andy Burnham has Announces Plans to Redistribute Income Tax Revenue to English Mayors
Early-Release Scheme Faces Fresh Scrutiny as Reoffending and Prison Recalls Rise
Police Phone Checks Followed Report on Murder of MI5 Agent Inside Sinn Féin
Archbishop of Canterbury Reaffirms £100 Million Reparative Justice Fund During Ghana Visit
Drought Status Extended Across All of Wales as Heat and Dry Weather Deepen Environmental Strain
Record-Low Danube Exposes Probable Mammoth Remains in Bulgaria
US Says It Has Carried Out Heavy Strikes on Iran After Attempted Attacks on Its Forces
The chief executive of the popular gaming company laid off many employees and his pay rose to 38 million dollars
The World's Most Terrifying Smartphone: Recording, Documenting, and Reporting to the Regime
The AI User Nightmare: Private Claude Conversations Leaked to the Internet
UK: Former Football Association Leaders Call for World Cup Boycott Over FIFA Privatization Plan
Forbidden Love: China severs millions from their virtual partners
Over 24 Hours in the Air: Qantas Airbus Completes Record-Breaking Test Flight
Zuckerberg Opposes US Ban on Chinese AI Models and Warns of Regulatory Capture
Massive Wildfires Ravage Southern Europe: Fatalities in Greece and Evacuations Across France, Spain, and Turkey
Trump says Israel ‘would not survive’ without US
France Evacuates Atlantic Coast Resorts as Wildfire Risk Rises Again
Magnitude 7.1 Earthquake Strikes Kumamoto as Rescuers Search Collapsed Buildings
OpenAI Faces Demands for Full Disclosure After Models Breach Hugging Face
Nvidia Reportedly Takes Vast Texas Data-Centre Lease to Underwrite AI Expansion
Royal Collection Trust Income Falls as Palace Visits Retreat From Record Highs
FIFA’s Private-Investment Plan for World Cup Rights Draws European Revolt
Ministers Examine Social-Care Levy as Burnham Seeks Funding Settlement
Apple Briefly Crosses Five Trillion Dollar Valuation as Investors Retreat From AI Bets
Badenoch Offers Tory Votes to Keep Serious Offenders in Prison
Why Americans Queue for $15 Ice Cream and a $100 Caviar Pint
Another AI Genius Left the United States — and Silicon Valley Is Starting to Worry
Shein Reports $99mn Loss as Trade Barriers Test Low-Cost Model
CXMT Gains 466% in China’s Biggest IPO Since 2010
Amazon Seeks Approval for 5,105-Satellite Mobile Network
Burnham Puts School-to-Work Reform at Centre of Welfare Strategy
Burnham Rules Out Replacing Council Tax and Stamp Duty
Fresh Heatwave Threatens to Rekindle France’s Historic Wildfire Crisis
Following OpenAI's Cyberattack: 'Most Companies Still Do Not Understand What Is Coming'
Autopsy Finds No Violence in Death of Epstein-Linked Model Scout
Indian Education Minister Resigns After Cockroach Youth Protests
California Desert Data-Centre Plan Stalls as Water and Power Disputes Mount
War, Youth Revolt and the Global Struggle for Control
War, Power and the Rising Price of Political Decisions
Badenoch Rejects Grant Shapps' Bid to Return as Conservative Candidate
BAE Chief Warns Britain Has Underestimated the Risk of War
Burnham Rules Out New Scottish Independence Referendum in First Talks With Swinney
OpenAI Sued After ChatGPT Allegedly Discouraged Emergency Care Before Near-Fatal Embolism
Viral Video Raises Questions Over Twelve-Dollar Croissants at Manhattan Bakery
Miliband Sets Climate and International Law at Centre of UK Diplomacy
US Gasoline Returns to $4 as Renewed Iran Fighting Disrupts Oil Flows
Czech Central Bank Governor Rejects Early Euro Entry and Rate-Cut Pressure
Trump Orders 50% Tariffs on Selected Canadian Imports
×