The Bank of England recently increased interest rates to 1.75% - the largest single rate increase in almost three decades! The decision has sparked uncertainty, leaving many of you wondering how your finances will be affected. In short, the interest hike, brought in to help tackle inflation will affect all of us in some way, but it isn't all bad…

Higher rates are good news for savers, especially those of you who are looking for a guaranteed income in retirement. It is likely that banks and building societies will offer better interest rates on cash savings, and pension providers will potentially offer more attractive annuity rates. 

However, if you’re looking to put money away, interest rates aren’t keeping up with rising prices, and therefore your money could lose some of its spending power in the longer-term. Investing can be a way to combat this, offering more attractive gains to help you maintain and grow your capital. Before investing your hard-earned money, it is important to speak with an Independent Financial Adviser to ensure the plan or product is suitable for your requirements and long-term financial goals. 

Although an interest rate increase can be beneficial for our savings, there are some downsides. The change will make borrowing money more expensive – impacting some homeowners as monthly payments will increase if you have a variable rate mortgage. Those with a fixed-term mortgage won’t see any immediate changes to their monthly repayments but should be prepared for a possible increase when it comes to the end of the term. 

Even if you don’t have a mortgage, the rate change could still impact you. If you have a credit card, bank loan or car loan you could see an increase in your repayments too. 

The base rate rise encourages people to save more and spend less. This tactic is used by the Bank of England to lower the rate of inflation and slow the price rise of goods and services. However, with rising prices across the globe, there is a limit as to how effective the UK’s interest rate increase will be. 

During these uncertain times, speaking to an Independent Financial Adviser is always recommended. We're here to answer your questions and work with you to ensure you’re taking the best steps to manage your money as efficiently as possible.

Arrange your free, no-obligation consultation by filling out the form below. A member of the Lowes team will be in touch with you shortly to discuss your needs.  

Lowes Financial Management is authorised and regulated by the Financial Conduct Authority.