The Bank of England has raised interest rates to their highest level in almost a decade but what are the effects of an interest rate increase on day-to-day finances?
:: Who are the winners and losers?
It is a modest increase of 0.25 percentage points to 0.75%. Households can expect the cost of their loans and mortgages to go up as banks and lenders lift their interest rates.
Savers, who have had the most to complain about in the low-interest rate environment, may see a modest gain.
:: What will be the impact of my mortgage?
Skipton Building Society chief executive David Cutter told Sky News that most new mortgages are fixed for two- to five-years.
“The vast majority of new loans, 90% are on fixed rates. Back book (older mortgages) about 66% so there is going to be no immediate impact regarding affordability,” Mr Cutter said.
This is why interest rates have been raised by the Bank of England
As the bank took its decision today, the mood could hardly have been more different from the crisis days in 2009
“On an average mortgage, if they do increase by a quarter of a percent, then I think your monthly payment will go up by £16 or about £190 a year.”
According to the Nationwide Building Society, anyone on a standard variable rate will see an increase of £12 on a mortgage of £100,000 and on a £200,000 mortgage, £25.
:: Why will savers benefit?
“The good news, of course, the rest of our membership, we have a million now, is the saving side because they have really suffered for ten years now. If rates do go up to 0.75% that will be highest since early 2009. So hopefully some relief is coming down the line as well,” Mr Cutter said.
Asked by business presenter Ian King whether the full rate increase would be passed on to savers, Mr Cutter responded: “Yeah, we’ll see what the reaction is in the market.”
While savers may be hoping for better returns, Bank of England statistics show that the average interest rate on UK current accounts increased by only 0.09% in the seven months since rates were increased by 0.25% last year.
:: Will this bring down prices at the shops?
While the Bank of England has raised interest rates partly to tackle inflation, this move will not be reflected in everyday prices for some time to come.
It took six months for the effects of the Brexit-hit pound to raise prices as imports became more expensive.
Retailers fear rate rises as higher mortgage and other bills for consumers mean they will have less money to spend.
The BoE predicted that inflation would be 0.1 percentage points higher this year and next at 2.5% and 2.2% respectively.