How do raised interest rates affect consumers?

How that affects consumers depends on the economy Take mortgages In places like Finland or Australia... ...lots of people have mortgages with variable interest rates If you’ve got a variable-rate mortgage, where the interest rate that you pay... ...is linked to the central bank’s interest rate... ...then higher interest rates mean that, essentially, immediately... ...the higher rate will translate into less cash to spend on other things Less spare cash means households will spend less And less spending means businesses will be warier of raising prices This should lower inflation In other countries, like America or Canada... ...a bigger share of mortgages are set at fixed rates People with fixed rates are protected... ...against the direct effects of an interest rate rise... ...but will still feel an indirect impact Higher interest rates mean that mortgages will become more expensive If that is affecting all new buyers, then house prices will begin to fall And that will make everyone who owns a home feel poorer... ...and therefore they might spend less Lower spending will translate into lower inflation And it’s not just consumers who will tighten the purse strings