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Interest rates: What the rise means for you

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The Bank of England has raised interest rates from 0.5% to 0.75% after much speculation.Expectations of a strengthening economy, solid employment levels, more consumer spending and the potential for wages to rise have all played a part in the decision.The Bank's main priority is to keep the rising cost of living - known as inflation - under control.It uses its key interest rate, known as the Bank rate or base rate, which is the reference point for how much banks and building societies pay savers and charge borrowers in interest.Generally, a rise in the Bank rate is good for savers and bad for borrowers - but the reality is a bit more nuanced.
Interest rates: What the rise means for you

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In fact, half of all savings accounts did not move at all after the last Bank rate rise in November. Commentators say savers could probably expect something similar this time.
According to the Bank of England, returns on longer-term cash Individual Savings Accounts (ISAs) were little changed in December.Yet they jumped significantly in January, with average returns on cash ISAs going up from 0.36% to 0.94%.In February and March they held steady at 0.86%, before falling subsequently to 0.63% by the end of June.
Retirement income
Any rate rise might also good for retirees buying an annuity - a financial product that provides an income for life.Annuity rates follow the yields - or interest rates - on long-dated government bonds, otherwise known as gilts.These yields could be expected to rise amid an environment of rising interest rates, giving retirees better value for money when they buy an annuity.
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Back in November 2011, a 65-year-old buying a joint annuity for ?100,000 would have got an annual income of ?5,404. Last year, that had dropped by ?1,318 to ?4,086.However, by now this has risen to about ?4,670. Depending on how the market views the likelihood of further base rate rises, annuity rates may continue to creep up.According to Willliam Burrows, of Better Retirement, a 1% rise in gilt yields translates into an 8% rise in annuity rates - but this remains a long-term consideration. "Annuity rates have been in the doldrums since the EU referendum in 2016, when gilt yields fell dramatically. Any increase in the bank rate should result in higher gilt yields, which will in turn lead to higher annuities," he said."However, don't hold your breath waiting for annuity rates to rise, because it is normally a slow process."But we are still a long way from the heady days of the 1990s, when a ?100,000 pension pot would have bought an annual income of about ?15,000 a year.
Personal finance
Mortgages
Savings
Bank of England
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