‘Borrowing your way out of inflation is a fairytale’: Sunak and Truss ...

The Bank of England has increased interest rates for the sixth time in a row from 1.25 per cent to 1.75 per cent - the largest increase for 27 years.

They are doing so in a bid to curb inflation, which they warn could pass 13 per cent this year.

Here's what it means for people:

1. It will make mortgages more expensive

The majority of people who have mortgages have a fixed-term plan but the some 25 per cent who don't might struggle.

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The BBC reports those on a typical tracker mortgage will have to pay about £52 more a month. Those on standard variable rate mortgages will see a £59 increase.

2. It will make renting more difficult

Buy-to-let landlords may pass on higher borrowing costs to their tenants, which means people in rentals will be in a sticky situation.

3. Paying off loans will be harder

People who have taken out loans will obviously now face higher interest rates when paying them back. This will also make it more difficult for people looking to get a loan in the near future, as they'll be met with these interest rates.

4. Savings will increase (maybe)

File:Piggy Bank or Savings Flat Icon Vector.svg - Wikimedia Commonscommons.wikimedia.org

On a positive note, if you have money in savings they will earn a greater rate of interest. But things are so expensive, people aren't exactly saving loads.

In June, Sarah Pennells, consumer finance specialist at insurance company Royal London, told ITV:

“While rising interest rates are generally a win for savers, our research shows that almost a third of people were planning to reduce the amount they were saving, while a fifth would stop altogether, as a result of the cost-of-living crisis".

5. Inflation may come down

But because of the potential increase in savings, people are encouraged to save not spend, which slows the economy down and brings down inflation.

We hope!

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