1..2 External influences: Interest rates Flashcards
What are interest rates?
This is the cost of borrowing money or the return for investing money
What does the base rate of 0.75% mean for borrowers and savers?
- Savers are not making much money
- Borrowers wouldn’t be borrowing much money (banks make it higher)
What is the impact on costumers of an increase in interest rates?
- Borrowing is more exspensive
- Mortgage and other loan payments increase
- More interest earned on saving
- Usually balances out to mean reduced cosumer spending
What is the impact on businesses of an increase in interest rates?
- Cost of borrowing increases
- Loan and other credit payments increase
- Reduced consumer spending
- Reduce revenues, Increased costs & Reduced profits
What will be the impact on consumers if the interest rates go up?
People will be spending less money on goods/services as it costs more to take out a loan
What will be the impact on consumers if the interest rates go down?
People will not buy goods as they are too exspensive
What will be the impact on borrowers if the interest rates go up?
Their loan repayments may increase
What will be the impact on borrowers if the interest rates go down?
Less money to spend on other goods
What will be the impact on savers if the interest rates go up?
They will save more money as products will be expensive so they will earn more money
What will be the impact on savers if the interest rates go down?
They will not spend much money to spend on goods and services
What will be the impact on homeowners if the interest rates go up?
mortgages will go up and it will be more expensive
What will be the impact on homeowners if the interest rates go down?
They wont spend much money on goods and services
What will be the impact on businesses if the interest rates go up?
They will be waiting to take a loan out to wait till the rates have gone down
What will be the impact on businesses if the interest rates go down?
They are less likely to spend or buy on new equipment or import products because they will want to save the money during a recession
