Interest rates have a big impact on both everyday people and businesses. Here’s how they work:
Consumer Borrowing: When interest rates go up by just 1%, someone’s mortgage payment could increase by about £100 a month. That means people will have less money to spend on other things.
Business Investment: If interest rates rise by 2%, the cost for businesses to borrow money goes up too. This can lead to a 10% drop in business investments, which can slow down their growth.
Money Supply: The Bank of England changes interest rates to keep prices stable. They want inflation to stay at around 2%. This affects how much money people save and spend.
Overall Economy: If rates rise by 1%, the economy might grow slower—about 0.5% less. This can change how well everyone is doing financially.
Overall, interest rates play an important role in how we borrow, invest, and spend money.
Interest rates have a big impact on both everyday people and businesses. Here’s how they work:
Consumer Borrowing: When interest rates go up by just 1%, someone’s mortgage payment could increase by about £100 a month. That means people will have less money to spend on other things.
Business Investment: If interest rates rise by 2%, the cost for businesses to borrow money goes up too. This can lead to a 10% drop in business investments, which can slow down their growth.
Money Supply: The Bank of England changes interest rates to keep prices stable. They want inflation to stay at around 2%. This affects how much money people save and spend.
Overall Economy: If rates rise by 1%, the economy might grow slower—about 0.5% less. This can change how well everyone is doing financially.
Overall, interest rates play an important role in how we borrow, invest, and spend money.