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3. interest rates


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3. interest rates

  1. 1. Interest Rates
  2. 2. Specification DetailHow changing interest rates affect small firms whichtend to rely on overdrafts and loans for financeThe impact of changing interest rates on consumerspending
  3. 3. What are Interest Rates?Interest rates is the annual percentage change madefor borrowing money.
  4. 4. How do interest rates change?Interest Rates are set by the Bank of England whomeet each month and can decide to change the rateof interest people should pay (Interest Rates).They will make this decision with the interests ofsociety in mind. It is based on some of the followingfactors: Employment Housing Government Debt Exchange rates Foreign investment
  5. 5. Interest Rates affecting small businesses The Bank of England then lends this money to the banks such as Barclays, Lloyds, NatWest etc.What affect does this then have on: Loans Overdraft
  6. 6. How do interest rates change consumer spending?High interest rates: Households with mortgages (money borrowed from the bank), need to pay more each month to pay off their house The fixed overheads (repayments) increase. This could mean cut backs on business investments (it will cost too much to borrow money) Or cut backs in staffingLow interest rates: Households with mortgages, will pay back less each month to the bank and have more money to spend. Money is cheaper to borrow from the bank, making expansion easier
  7. 7. Bank of England : HereOne point = 0.25%Here for statistics
  8. 8. Role Play
  9. 9. 3% : Here