Three ways the interest rate rise could affect you

Policymakers at the Bank of England have raised interest rates for the first time in more than three years - and it could be good and bad news for you.

Here's how millions of people could be affected by the decision, which raised the benchmark borrowing rate from 3.75% to 4%.

Rate-setters at the Bank make changes to interest rates to fulfil their role of keeping price rises at a steady level.

Higher rates are meant to encourage people to spend less, reducing demand for goods and services and limiting price rises.

This impacts businesses in two ways - less money to spend among their customers may mean they sell less, but also the cost of borrowing to invest as a company goes up.

Many businesses, particularly small ones, have variable rate loans which are influenced by the Bank rate.

Firms say higher rates limit their ability to offer new jobs and wage rises.

Mitchell Barnes, founder and chief executive of Ryse 3D, which manufactures 3D parts for the defence and automotive sectors, said the "reality" of rising interest rates was to look at the cost of employees and people.

That could include greater use of robots rather than workers.

"It's going to cause issues with, I suppose, employment across all sectors for people," he said.

"You're going to see reduced employment, more automation, more robotics being put into facilities, just in order to increase efficiency and make that money go further."

The Bank rate - and where it is expected to go in future - has a significant impact on the interest rates customers are offered on savings products.

So, if you're saving up for something quite expensive, like a holiday, or very expensive, like a home, then a rate rise could be good news.

When interest rates were low throughout the 2010s, the returns for savers were poor, but borrowing costs were low too.

The answer then and now, according to experts, is to make sure you move your savings to benefit from the best possible rates.

Leaving your savings in an old account (a product not offered to new customers), rather than shopping around, can mean you are penalised for your loyalty.

"Savers have endured years of unrewarded loyalty, with those leaving [a £20,000 cash pot] in closed accounts losing out on an extra £139 over the past three years compared to on-sale easy access accounts," said Rachel Springall, from financial information service Moneyfacts.

She also said locking away your money for longer, with a fixed-term deal, is usually more lucrative.

The other flipside is that renting while you save could get more expensive, because a rising Bank rate may well increase costs for landlords.

The average rate on fixed deals are much higher now than was predicted at the start of the year. It means those remortgaging, possibly after the post-Covid boom in the housing market, are facing the prospect of higher mortgage payments.

Some people have been choosing to move onto tracker deals instead, taking a view - including some risk - of the Bank rate not moving towards a series of further hikes.