Interest rates play an important role in how much you pay on loans and mortgages with these increasing and decreasing over time.

The Bank of England controls UK interest rates with its Monetary Policy Committee (MPC) announcing changes in response to various economic factors like inflation.

With interest rates always in flux and these impacting mortgage holders and those paying off debt across the UK, here is everything you need to know about it.

What are interest rates?

The National: (Canva) Interest rates affect how much you pay on debt(Canva) Interest rates affect how much you pay on debt (Image: Canva)

Interest rates tell you how high the cost of borrowing is as well as how high the rewards are for saving.

According to the Bank of England: "If you’re a borrower, the interest rate is the amount you are charged for borrowing money, shown as a percentage of the total amount of the loan. The higher the percentage, the more you have to pay back, for a loan of a given size.

"If you’re a saver, the savings rate tells you how much money will be paid into your account, as a percentage of your savings. The higher the savings rate, the more will be paid into your account for a given sized deposit."

How do interest rates affect me?

Interest rates affect a whole host of people across the UK, including those who are paying off mortgages and loans as well as lenders such as the bank.

If you have a mortgage on a property and are still paying it off then the amount you will be paying will increase.

Why do interest rates rise and fall?

Interest rate levels often change in response to inflation and as such the bank will increase rates to stave this off.

If inflation is rising too quickly, the MPC will raise the base rate to combat this. If inflation goes up, interest rates may go up.

How do I find the current UK interest rate?

For an up-to-date figure on UK interest rates, you can visit the Bank of England website where the current Bank Rate, which affects interest rates, can be found.

The National: (PA) The Bank of England regulates Bank Rate which affects interest rates(PA) The Bank of England regulates Bank Rate which affects interest rates (Image: PA)

What is Bank Rate?

Bank Rate is a powerful tool used by the central bank and is the rate charged on its loans and advances to commercial banks.

This is important as this rate has an impact on interest rates elsewhere in the economy.

If this changes, the rates of standard mortgages and loans will also change.

What is the Bank of England?

Founded in 1694, the Bank of England is the UK's central bank, meaning it does not issue mortgages and loans to the public.

The Bank of England is the only bank in England and Wales which can issue banknotes with it having the power to regulate the creation of Sterling by commercial banks in Scotland and Northern Ireland.

The Bank has the power to maintain price stability, change UK interest rates and regulate much of the economy.