It may not be something that we think about a lot but interest rates actually have a massive impact on all of our lives. Whether you live in a heavily mortgaged house, have a large amount of savings stashed away or find yourself somewhere between these two extremes - interest rates effect all of us. Recently, they just seem to keep rising and rising. On 7th July 2007 the Bank of England increased interest rates by 0.25% to their current level of 5.75%, the highest rate of interest for the past six and a half years.

If you have a mortgage of around ,000, which is about the average level for home owners in the UK, you will be left paying an additional two hundred pounds per year. As a proportion of your whole mortgage payment it may seem insignificant but it is actually a fairly large increase for mortgage payers to face, especially those that have opted to pay interest only. To make matters worse, this is just the latest in a long line of interest rate rises, which have seen the average monthly mortgage payment increase by around since last August.

On the flip side of the coin (no pun intended), the rise in interest rates is actually a good thing for savers. If their bank does decide to pass the increase on to their clients then they will see the interest that they collect from their savings each month, increase. As it is a percentage increase, the more you save, the more you will benefit from the latest interest rate rise.

People at the Bank of England seem to suggest that inflationary pressures remain high. However, most analysts believe the Bank should wait for the latest increase to take effect, before deciding to elevate interest rates even further. They warn that any further rise in interest rates could leave borrowers unable to make their payments, resulting in them losing their homes. This could be just as bad for the British economy.