'Interest rates rise means I owe £250 a year more on loans'

·5 min read
Patrick Reid
Patrick Reid owes £25,000 in loans and credit cards

The Bank of England has increased interest rates by half a percentage point - the biggest amount for 27 years.

Rising interest rates can affect people in different ways, often creating extra costs and worries.

But while it can increase the cost of borrowing, hitting business plans or mortgage hopes, savers may give a small cheer.

The BBC spoke to five people about how higher interest rates would change their circumstances.

'I'll have to find another £250 a year to cover my debts'

London-based Patrick Reid owes thousands on credit cards and loans and fears an interest rate rise will cost him.

"I have personal loans and credit cards totalling £25,000 so any increase will be hugely noticeable.

"At present I repay around £1,800 a month but I have worked out that I will conservatively need to pay another £250 a year to keep up with the debts.

"My income is good as I own my own business and hopefully that will continue - but if my customers drop off it will be financially painful.

"I will simply have to tighten my belt and be extra cautious in my spending, which means all of those non-essential items will be cut from my budget.

"I'm very worried about future rate rises. I honestly don't think the UK can take another hike. It will cripple the economic outlook and businesses will suffer."

This story has been updated to clarify that the £250 owed was per year not per month.

'It's a never-ending cycle of trying to make ends meet'

Wayne Trim, 38, works as a customer services manager at Morrison's in Verwood, Dorset. He's worried about the impact of rising interest rates on his mortgage.

"My mortgage payments were £416 last year and now they're £515 and will keep going up.

"That could start hindering my commute to work. I moved to a new store a little while ago. It's an hour's drive. They did give me a pay rise to move stores, but I needed a new car, which took a fair chunk of my pay rise.

"I bought a hybrid. I'm spending about £200 a month filling it up.

"If you look at everything globally, everything is going up. Fuel, food. We can look at the food shop and be a bit more crafty with that. I do get a discount for working at Morrison's.

"You think you're in a position where you're financially comfortable and then all these things start. It's like a never-ending cycle of trying to make ends meet.

"I'm also repaying some loans, that's about £270 a month. That finishes in April, so I'm looking forward to that.

"I'm a simple person. I don't understand why they're doing the rate increases. They tell us it's to curb borrowing but all it means for me is I'm cancelling Netflix and Amazon."

'We can't afford to move if rates rise'

Louise Parker
Louise Parker

Louise Parker and her husband have been saving to move home in Brighton since 2020, but are having to have a major rethink because of rising interest rates.

"I know that we are in a very privileged position to be in a home that we own in the first place with a decent mortgage rate fixed for two years.

"But we've had to substantially reconsider the amount of money we can borrow. It's meant we're looking at smaller houses which, considering we were wanting to move to start a family, is making us wonder whether we should bother moving at all.

"Our options are either to stay put where we are or move to something about £200,000 cheaper than we had hoped.

"We're also worried about how long we should fix for if we move. We don't want to be stung after two years if rates have gone up even more, or have to downsize because we can no longer afford the repayments.

"It's just such an adjustment to have to think about interest rates. It's a new hurdle in the mix."

'A rate increase will help my savings'

Edmund Wood
Edmund Wood

Edmund Wood is saving to buy a home close to London so hopes the interest rate rise will help his deposit grow more quickly. He also hopes rising rates will help the rum business that he owns.

"An increase in interest rates is good for me. I'm saving up a deposit, so more interest will mean my savings will go up quicker.

"And as I look further ahead to actually buying a house, I've been worried about rising property prices - they have climbed every month for the last 12 months in a row.

"That wouldn't be good if I was ready to buy now, but in two years when I've saved up during a period of increasing interest rates, hopefully house prices will fall again, which will leave me in a better position to buy.

"Also hopefully by then interest rates will have stabilised somewhat, meaning I'll be able to get a stable interest rate on a mortgage.

"I think rising interest rates will also be good for my rum business if they bring inflation down. That in turn should reduce the cost of living, leaving people having more money in their pocket at the end of the month."

'Higher rates will hit my business's expansion plans'

Paola Dyboski
Paola Dyboski

Paola Dyboski runs a small manufacturing business in North Wales called Dr Zigs Extraordinary Bubbles and fears the rate rise will put her expansion plans in jeopardy.

"We're ambitious and currently expanding globally and finding growth in export markets.

"But, with expansion on the cards we would look to borrow to increase production and outputs and manage this growth.

"Increased interest rates will make this hugely more risky and challenging. It will bring into question the viability of our UK manufacturing base.

"I am also concerned that if our trade customers can't borrow, they will then cut on their spending and their purchases from us. We will all be affected."