Why are interest rates rising and how does that affect borrowing?

Interest rates are going up because money lenders are asking for more money back when they lend it out.

Imagine you have a piggy bank where you keep your allowance. When you want to buy something bigger, like a new bike, you might ask your parents for a loan, they give you the money now, and you promise to pay them back later with a little extra. That extra is like interest.

Now imagine your parents are feeling like they need more extra money from you because their own piggy bank isn’t as full as it used to be. So, they ask for a bigger extra, that’s why interest rates are rising.

When interest rates go up, it means borrowing costs more. If your parents want more extra money from you, you might need to save more before you can buy that bike.

The same thing happens with banks and big companies, if they have to pay more back when they borrow money, they might pass that cost on to you when you take out a loan for something like a toy or even a house one day.