UK Interest Rates and What They Mean for Mortgages
Listen to the story
The Bank of England is the UK's central bank. It decides the country's main interest rate.
This rate is important because it affects how much people pay to borrow money. It also affects how much people earn from saving money.
One of the biggest effects is on mortgages. A mortgage is a loan people use to buy a home.
When the interest rate changes, monthly mortgage payments often change too. This can happen for people with a variable rate mortgage or when a fixed rate deal ends.
A fixed rate mortgage keeps the same payment for a set period. A variable rate mortgage can go up or down with the interest rate.
The interest rate also affects loans, such as money borrowed for a car or other big purchase.
At the same time, it affects savings accounts. When rates rise, savers can sometimes earn more money.
These changes affect millions of people across the UK. Many households feel the effect on their monthly budgets.
The Bank of England reviews the interest rate regularly. It looks at the state of the wider economy before deciding whether to change it.
People often follow news about interest rates closely, especially if they have a mortgage or savings account.
Vocabulary8 words
- Bank of England
- the main bank that controls money for the whole UK
- interest rate
- the cost of borrowing money, shown as a number
- mortgages
- loans people use to buy a house
- variable rate
- a rate that can change over time
- fixed rate
- a rate that stays the same for a period of time
- loans
- money that is borrowed and paid back later
- savings
- money that is kept, often earning extra money over time
- economy
- the system of money, jobs and business in a country
Quiz
Answer key
1. The Bank of England 2. The payment can go up or down 3. True
Fill-in-the-blank listening
Play the audio again and fill in the missing words as you listen.
The Bank of England is the UK's _____ bank.
It decides the country's main _____.
One of the biggest effects is on _____.
A mortgage is a loan people use to buy a _____.
This can happen for people with a _____ rate mortgage.
A fixed rate mortgage keeps the same payment for a set _____.
The interest rate also affects _____, such as money borrowed for a car.
When rates rise, savers can sometimes earn more _____.
These changes affect millions of people across the _____.
It looks at the state of the wider _____ before deciding.
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