It can be very easy to worry when the Bank of England changes the base rate. This is because rates have stayed consistent for a long time and when it changes it can be a worry to think about what the consequences might be. The media report on it as well and come up with the worst case scenarios of how it might lead to big problems and this can lead to panic. Most rate changes are not huge and may not even have an effect on some people. It is therefore advisable to be sensible and think about how it might affect you personally rather than worrying about which the press are saying.
It is worth starting by looking at what you are currently paying for any debts that you have, including loans and mortgage and what interest you are receiving on any savings that you have. You can calculate the interest simply by multiplying the interest rate by the amount of money that you owe or hold and then divide by 12 to find out the monthly figure. If you have a mortgage, for example, do this for the current rate that you are paying and then calculate it for what you think the new rate will be and see what difference it makes. You may find that the difference is not going to make a huge impact on you anyway. You may not even find that the rates you are paying or receiving change anyway as even when the base rate changes, financial institutions do not always change their rates, unless you have a tracker account.
Years ago rates tended to change a lot going up and down every few months and this meant that no one really worried too much as they were used to coping with it. Now that rates have been low for so long it is a big deal when they do change and this is therefore why people get more concerned. It is wise to be prepared though so that when rate changes happen you have no need to panic.
If you have debt then you will most likely have to pay back more each month in interest payments if the base rate goes up. Lenders tend to increase their rates very quickly when the Bank of England increases their rate and this means that you will need to be prepared for this. However, if you fix your rate it will protect you from this. It can also be wise to hunt around for better rates and make sure that you are paying the lowest possible amount so that you are not paying more than necessary. When you are borrowing money make sure you think about how you will cope with the repayments if the rates do go up by ensuring that you do not borrow so much that you will struggle if rates go up. Obviously if rates fall this could be great news for you but unfortunately lenders tend to be quick to put up rates when they rise but do not lower them so quickly when they fall. So unless you have tracker, which has to track the base rate, you may not see your rate lower.
If you have savings then an interest rate change could also affect you. Although rates on mortgages tend to be most closely effected by base rate changes, savings accounts could also change as well. It can be a worry if the rates keep falling and you are not seeing a good return on your savings, particularly if you are hoping that you can use the interest as part of your income. However, many people have moved savings into investment accounts lately because of this. If you money is invested them a rate change will not have a direct impact on it, although a knock on effect could change the stock market which is more likely to influence your return. With savings accounts it is likely that if interest rates fall, the rates will also fall but if they go up the rates may not go up. It is wise to keep a check on which savings accounts are offering the best rates and taking advantage of these, moving your money regularly to make sure that you are getting the best return that you can.