How do interest rates affect you?

Interest rates directly impact your finances by influencing how much it costs to borrow money for major purchases like a house or car, meaning higher interest rates result in higher monthly payments and can discourage borrowing, while lower rates make borrowing more affordable and can encourage spending; they also affect the returns you earn on savings accounts, with higher rates providing a better return on your deposited money. 

Key points about how interest rates affect you:

• Borrowing costs:When interest rates rise, the cost of borrowing money for loans like mortgages, car loans, or credit cards also increases, leading to higher monthly payments and potentially discouraging large purchases. 
• Savings accounts:Higher interest rates can benefit your savings accounts, as you earn more interest on the money you deposit. 
• Investment impact:Interest rates can influence the value of certain investments, like bonds, as their prices tend to move inversely with interest rates. 
• Economic impact:Overall, rising interest rates can slow down the economy by discouraging borrowing and spending, while lower rates can stimulate economic activity. 

Who is most affected by interest rate changes:

• Homebuyers:As mortgages are typically large loans, fluctuations in interest rates significantly impact the affordability of buying a house. 
• People with variable rate loans:Individuals with loans that have variable interest rates will see their monthly payments fluctuate directly with changes in interest rates. 
• Debt holders:Individuals with high levels of debt will see their interest payments increase when rates rise, making it more expensive to service their debt.