There are many people that have been thinking about interest rates lately. Whether they go up or down can have an impact on people and the impact that it has will depend on whether they have loans or savings. Anyone with a loan will find that if interest rates go up then it is likely that their loan repayments will also go up and there a rise in rates will cost them money. However, anyone with a savings account will find that a rise in rates will give them a better return on their savings and will therefore be beneficial to them. A rise in interest rates will also have a knock-on effect on spending as it will encourage savers to save more as they get better rewards for saving and those borrowing money will have less money to spend. This will generally keep spending lower and that will prevent process rising too quickly as retailers can afford to increase prices if people have a lot of money to spend.
Predicting rate rises
It can be quite tricky to predict interest rate rises. If the rates are low then it is more likely that they will go up. However, there have been periods where the rates have stayed very low for a long time and then gone even lower. Therefore, that is not always a good wat to predict them. You could also feel the opposite and that if rates are high and have been for a long time them there are unlikely to go up, but again this has happened so it is not a guaranteed predictor.
Economists will often make predictions about what might happen in newspaper reports and this could be something to look out for. However, they are not always right and so you should not completely depend on what they say. They will obviously use their experience to make predictions, but things might change and therefore their predictions will not be correct. They are more likely to be correct than someone that is not an expert in this field though and so it is worth seeing what they might think.
The head of the Bank of England is on the committee that decides whether interest rates will change. He will sometimes give a statement and explain what might happen with regards to interest rates. As he is influential in the bank and votes on whether the rates should change then his thoughts could be really important.
Preparing for rate
It can be wise to prepare for rate changes just in case anyway. If you are paying interest on loans or have savings, then it is good to be prepared for rises.
If you have loans then you will need to think about whether you will be able to afford rate increases. Think about whether you normally have money left at the end of the month and if this will be enough to cover any increases in rates that you will need to be covering the cost of. If you are not sure how you will cope then maybe you should not take out a loan at the moment. If you already have one then it could be a good time to look into what you might be able to do in order to make sure that you can cope with it. It could be that you could look at the things that you are spending your money on and see whether you could cut down in any areas if necessary. It might also be that you could start to more consciously compare prices and see whether you can buy the things that you always buy cheaper. It can be really wise to either take action right away or have a plan to put in to place if you need to.
It can be best to actually cost things out. Work out ow much more you might be paying if interest rates go up by half a percent, one percent or two percent, something like this. Then you will know exactly how much extra you will have to pay. This will allow you to plan better as you will know exactly how much money you will need. It is always good to assume the worst and plan to make more than you will potentially need just in case. Think about different areas where you might be able to cut back. Think about which might be the easiest and which might be harder. Then if you only need to cut back a little bit then you could take the easier options but if you need to cut back more then you will have those harder options available too. It might be that you can think of ways to make more money as well as ways to spend less which could help even more.