Interest rates affect most of us. You might not realise it, but a change in interest rates can impact your day-to-day life; from the cost of getting a loan, through to the prices of everyday goods.
An interest rate is a percentage charged on the total amount you borrow or save.
Even a small change in interest rates can have a big impact. It’s important to keep an eye on whether they rise, fall or stay the same.
If you’re a borrower, the interest rate is the amount you are charged for borrowing money – a percentage of the total amount of the loan. You can borrow money to buy something today and pay for it later.
Interest is what you pay for the privilege. It’s a bit like hiring a car. Interest is what you pay to ‘hire’ someone else’s money.
If you’re a saver, it’s the same except the interest fee is paid to you – because banks are paying to hire your money.