Higher interest rates: Good or Bad?

The Story

Mark Carney, the Governor of the Bank of England, has said that interest rates may rise before Christmas.   

Why would this happen?

Well, life is getting expensive. From a new Zara winter jacket to your daily latte, prices are rising, aka inflating. To get a grip on inflation, the Bank of England can raise interest rates, which makes borrowing money more expensive. It sounds counter-productive but it actually helps keep prices down. It ultimately means people have less disposable cash so they spend less. In turn, this prevents prices increasing so much. 

Is a rate rise good for me then?

It depends if you owe money or not. If you have credit card debt or a variable mortgage, your costs go up.  But if you have plenty of savings and little debt, you will earn more on the cash you keep in the bank or lend via a peer-to-peer platform. 

"An interest rate rise of 0.5% could increase the cost of a £200,000 mortgage by £55 per month."

Anything else?

Higher interest rates strengthen the pound which makes your spending money go further. Goods imported to the UK (think: food, clothes, fuel, ..) will get cheaper and your trips abroad will also be less expensive as you get more foreign currency for your pounds (Bonus!).