Interest rates rises – navigating the impact

Navigating interest rates rises


Constant rises in interest rates have sparked concerns and uncertainties about the state of the UK economy. With the Bank of England raising interest rates more frequently than ever, it’s important to understand the potential consequences of these rises, and ensure your financial wellbeing is protected.

In this article, we highlight the current economic climate and outline challenges as a repercussion of this, as well as sharing tips on how to prepare for the undetermined.

The Financial Market Overview – August 2023

Even though the Bank of England raised the base rate to 5.25% on 3 August 2023, as of the latest reports, mortgage rates are actually looking likely to continue to fall. The reason for this is that lenders already factored this rise into their fixed-rate mortgages.

As there was an unexpected but welcomed fall in June’s inflation figure, it’s predicted from experts that with the 14th consecutive rise of interest rate, we could be nearing the end of such measure to kerb inflation.

Impact on the UK Economy

The sharp rise in interest rates has created both short-term and long-term implications for the UK economy. One of the immediate consequences is an increase in borrowing costs. This means that credit card debts, personal loans, and mortgages come with higher interest rates, potentially straining household budgets.

Individuals with variable rate mortgages may see their monthly payments rise, putting pressure on their finances. Additionally, those with substantial credit card debts could face challenges as the interest rates on their balances increase. This scenario highlights the importance of managing and reducing debt as interest rates rise.

Preparing for Financial Difficulties

Should the base rate continue to rise, it’s currently better to play it safe when it comes to the UK economy. The important thing is that there are steps that you can take to protect your financial wellbeing, so you can be prepared if there is another surge in interest rates.

Evaluate Your Debt
Assess your current debt situation and develop a plan to reduce high-interest debts, such as credit cards or personal loans. You could also consider consolidating debts into lower interest options.

Review Your Mortgage
If you’re a homeowner with a variable-rate mortgage, you might want to speak with your lender to explore the possibility of switching to a fixed-rate mortgage. This will provide stability in monthly payments and protect against further increases.

If you’re coming to the end of your fixed rate incentive period, you may wish to review this before you revert to your lenders’ Standard Variable Rate, as you may incur additional interest.

Mortgage products change daily, with some reacting to market influences, and others, in line with their direct competition, so it’s always wise to talk to someone who has access to the entire market. This way you’ll find the best product for your circumstances, and a small percentage could make a big difference.

Build an Emergency Fund
Creating an emergency fund might seem impossible with interest rates and the cost-of-living crisis, but every penny counts. Having a substantial amount saved can act as a financial safety net during uncertain times. Aim to save three to six months’ worth of living expenses to alleviate any unexpected financial burdens.

Budget and Prioritise
Review your monthly expenses and identify areas where you can cut back. If you prioritise essential spending only, you could surprise yourself to see how much you are left with before the next payday.

Here to help

Consulting an expert can provide personalised guidance tailored to your specific circumstances. Their advice can navigate you through challenging times and make informed decisions based on your finances.  The best starting point would be to speak to one of our Client Managers who can help guide you in the right direction, and put you in touch with one of our in-house funding experts or partners. To get in touch, please email

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