how do interest rates effect businesses and my family? Essay

Submitted By holly29199
Words: 396
Pages: 2

How Does a Rise in Interest Rates Affect Businesses, consumers, and My Family?

Interest rates are the cost of borrowing and benefit of saving; they change for borrowing or saving money over a period of time. A rise in interest rates is not beneficial for borrowers (people who take out a loan) but for savers and lenders it means more money. An increase in interest rates affects borrowers by increasing the amount of money they have to pay back. An increase in interest rates affects savers by increasing the amount of money they receive after the contract has ended.
An increase in interest rates affects businesses, especially smaller self-run businesses, by increasing the amount of money they have to pay back if they need to take out a loan. The effect of a change in interest rates will depend on several factors, such as: the amount that a business has borrowed and on what terms, the cash balances that a business holds, and whether the business operates in markets where demand is sensitive to changes in interest rates. The demand for goods or services is likely to fall as home owners who have variable mortgage rates or taken out a loan will have less disposable income to spend on unnecessary wants. If the business isn’t getting as much custom this could lead to them having overdraft charges. Overdraft charges have interest rates and they will need to pay more money into the bank. In the end the business will result in becoming bankrupt.
Interest rates have a role in your daily life. An…