Interest rates have gone up again for the third time in just a matter of months.
The Bank of England increased rates from 0.5% to 0.75% on Thursday (March 17) and predicted inflation - the increase in the price of goods and services - could reach a whopping 8% by June.
But what does this mean for borrowers and savers?
Higher interest rates mean the cost of borrowing is likely to rise, with some households facing increases in their mortgages.
Savers, meanwhile, are unlikely to feel the benefit of increased savings rates as the cost of living continues to surge.
According to financial firm Interactive Investor, higher interest rates are likely to have a particular impact on homeowners with variable rate mortgages.
For homeowners with an 80% loan-to-value capital repayment mortgage over 25 years on a property valued at £278,123 (the average UK house price), the rates increase means those on a typical two-year tracker mortgage deal could end up paying £27 a month more.
Meanwhile, those on the average standard variable rate could face an additional repayment burden of £32 a month, Interactive Investor said.
Myron Jobson, senior personal finance analyst at Interactive Investor, said: “The rate rise combined with the upcoming hike in national insurance contributions, rising energy prices and ballooning inflation threatens to push many households to financial breaking point."
Interactive Investor said the impact on people with a fixed-rate deal would be less immediate, but that homeowners could be in for a “shock” when they remortgaged.
However, Mr Jobson pointed out there were still “many competitive deals” in the market.
“Anyone looking to buy or remortgage in the near future should consider securing a deal now," he said. "Mortgage deals are often valid for a number of months, and it is not too early to start looking for the best deals now.”
Meanwhile, savers who were hoping the interest rate hike would be good for their bank balance have been warned not to “hold their breath”.
“It could take a few months before consumers experience an uplift in savings rates – if at all,” said Mr Jobson, who said banks and building societies had been “notoriously slow” in passing on the past two base rate hikes.
He added: “Savings rates have only gone up a smidge which is disappointing given the extent of the cost-of-living crisis.”
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