A quick guide to interest rates
Interest rates are big news when they change - but why? If you're not familiar with what they are and how they affect you, here's our quick guide to what it all means.If a friend loans you £10 at a 10% interest rate, you'll pay them back £11. That's the £10 you borrowed plus an extra £1 as interest. Banks have more complicated ways of calculating this, but that's the general idea.
If interest rates are very high, first-time buyers who lined up a house with a mortgage at 3% interest suddenly might find they can't afford the monthly payments for the same house at 6%. And banks might decide not to loan the money at all if they're worried about people being able to pay the higher amount every single month.
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