Beautiful Virgin Islands

Wednesday, Dec 24, 2025

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
Hong Kong Climbs to Second Globally in 2025 Tourism Rankings Behind Bangkok
From Sunniest Year on Record to Terror Plots and Sports Triumphs: The UK’s Defining Stories of 2025
Greta Thunberg Released on Bail After Arrest at London Pro-Palestinian Demonstration
Banksy Unveils New Winter Mural in London Amid Festive Season Excitement
UK Households Face Rising Financial Strain as Tax Increases Bite and Growth Loses Momentum
UK Government Approves Universal Studios Theme Park in Bedford Poised to Rival Disneyland Paris
UK Gambling Shares Slide as Traders Respond to Steep Tax Rises and Sector Uncertainty
Starmer and Trump Coordinate on Ukraine Peace Efforts in Latest Diplomatic Call
The Pilot Barricaded Himself in the Cockpit and Refused to Take Off: "We Are Not Leaving Until I Receive My Salary"
UK Fashion Label LK Bennett Pursues Accelerated Sale Amid Financial Struggles
U.S. Government Warns UK Over Free Speech in Pro-Life Campaigner Prosecution
Newly Released Files Shed Light on Jeffrey Epstein’s Extensive Links to the United Kingdom
Prince William and Prince George Volunteer Together at UK Homelessness Charity
UK Police Arrest Protesters Chanting ‘Globalise the Intifada’ as Authorities Recalibrate Free Speech Enforcement
Scambodia: The World Owes Thailand’s Military a Profound Debt of Gratitude
Women in Partial Nudity — and Bill Clinton in a Dress and Heels: The Images Revealed in the “Epstein Files”
US Envoy Witkoff to Convene Security Advisers from Ukraine, UK, France and Germany in Miami as Peace Efforts Intensify
UK Retailers Report Sharp Pre-Christmas Sales Decline and Weak Outlook, CBI Survey Shows
UK Government Rejects Use of Frozen Russian Assets to Fund Aid for Ukraine
UK Financial Conduct Authority Opens Formal Investigation into WH Smith After Accounting Errors
UK Issues Final Ultimatum to Roman Abramovich Over £2.5bn Chelsea Sale Funds for Ukraine
Rare Pink Fog Sweeps Across Parts of the UK as Met Office Warns of Poor Visibility
UK Police Pledge ‘More Assertive’ Enforcement to Tackle Antisemitism at Protests
UK Police Warn They Will Arrest Protesters Chanting ‘Globalise the Intifada’
Trump Files $10 Billion Defamation Lawsuit Against BBC as Broadcaster Pledges Legal Defence
UK Says U.S. Tech Deal Talks Still Active Despite Washington’s Suspension of Prosperity Pact
UK Mortgage Rules to Give Greater Flexibility to Borrowers With Irregular Incomes
UK Treasury Moves to Position Britain as Leading Global Hub for Crypto Firms
U.S. Freezes £31 Billion Tech Prosperity Deal With Britain Amid Trade Dispute
Prince Harry and Meghan’s Potential UK Return Gains New Momentum Amid Security Review and Royal Dialogue
Zelensky Opens High-Stakes Peace Talks in Berlin with Trump Envoy and European Leaders
Historical Reflections on Press Freedom Emerge Amid Debate Over Trump’s Media Policies
UK Boosts Protection for Jewish Communities After Sydney Hanukkah Attack
UK Government Declines to Comment After ICC Prosecutor Alleges Britain Threatened to Defund Court Over Israel Arrest Warrant
Apple Shutters All Retail Stores in the United Kingdom Under New National COVID-19 Lockdown
US–UK Technology Partnership Strains as Key Trade Disagreements Emerge
UK Police Confirm No Further Action Over Allegation That Andrew Asked Bodyguard to Investigate Virginia Giuffre
Giuffre Family Expresses Deep Disappointment as UK Police Decline New Inquiry Into Andrew Mountbatten-Windsor Claims
Transatlantic Trade Ambitions Hit a Snag as UK–US Deal Faces Emerging Challenges
Ex-ICC Prosecutor Alleges UK Threatened to Withdraw Funding Over Netanyahu Arrest Warrant Bid
UK Disciplinary Tribunal Clears Carter-Ruck Lawyer of Misconduct in OneCoin Case
‘Pink Ladies’ Emerge as Prominent Face of UK Anti-Immigration Protests
Nigel Farage Says Reform UK Has Become Britain’s Largest Party as Labour Membership Falls Sharply
Google DeepMind and UK Government Launch First Automated AI Lab to Accelerate Scientific Discovery
UK Economy Falters Ahead of Budget as Growth Contracts and Confidence Wanes
Australia Approves Increased Foreign Stake in Strategic Defence Shipbuilder
Former UK Prime Minister Boris Johnson proclaims, “For Ukraine, surrendering their land would be a nightmare.”
Microsoft Challenges £2.1 Billion UK Cloud Licensing Lawsuit at Competition Tribunal
Fake Doctor in Uttar Pradesh Accused of Killing Woman After Performing YouTube-Based Surgery
Hackers Are Hiding Malware in Open-Source Tools and IDE Extensions
×