How Interest Rates Impact You And Your Family (It’s Not Just About Mortgage Holders)

Interest rate talk is everywhere, especially with last week’s decision by the Reserve Bank of Australia (RBA) to cut the official interest rate to 2.5%.  Many people think that changes in interest rates impact only those who have a mortgage but this is simply not true.  Changes in interest rates impact everybody.  They influence whether individuals like you and I decide to save or spend or borrow.  Or whether businesses, large and small will expand or contract.  In this way interest rates impact the direction of the whole economy, impacting the daily lives of you and me.

So let’s start at the start – what is an interest rate?  An interest rate is simply the price of money.  The lower interest rates are the cheaper it is to borrow money and spend it and the less attractive it is to save money (because you don’t get much return on your savings).  […]