Interest Rates: The cost of borrowing money and the return for lending money.
The Bank of England
The effects of interest rate changes Changes in interest rates affect virtually every part of the economy – from homeowners with a mortgage, to business confidence, to the exchange rate and the prospects of UK exporting businesses
Higher interest rates: Who gains and who loses? • A homeowner with a variable rate mortgage of £ 280, 000 • A pensioner couple who have paid off their mortgage and have some savings in a building society account • A young married couple with few savings who find that they cannot afford to buy their first property • A travel agent, 70 per cent of the holidays they sell are to British consumers to overseas destinations • A manufacturer of kitchen units in the West Midland with a high level of bank loans • Workers in a UK factory that manufactures and exports sports clothing to the United States
Go to: • http: //www. bized. co. uk/cgi-bin/ked. pl What is the relationship between • Interest rates and GDP Growth • Interest rates and inflation
Interest Rates and Inflation
Interest rates and house prices
Evaluation: • “it depends on…” • The size of interest rate change • Whether you are a saver or borrower • The relative size of consumer income
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