As the UK braces for what is expected to be the biggest hike in interest rates in decades, we thought we would look into what interest rates are. 

Although the phrase has been floating around for a while, with discussions of rising costs, mortgages and more it can all get a bit confusing. 

But one of the main factors of all the current money talk is interest rates. 

What are interest rates?

According to the Bank of England, an "interest rate tells you how high the cost of borrowing is, or (how) high the rewards are for saving."

That means if you are a borrower, the interest rate is the amount you are charged for borrowing money which is shown as a percentage of the total amount of the loan. 

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The higher the percentage, the more you have to pay back, for a loan of a given size.

But if you are a saver, the 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 might seem small but they can have a very big impact on finances. 

Meaning that it's important to keep an eye on whether they rise, fall or stay the same.

READ MORE: What does the rise in interest rates mean for first-time buyers?

Currently, with interest rates continuing to rise, those that borrow such as people on mortgages could see an increase in the rate they pay. 

Meaning that the predicted interest rise of 0.75% could see buyers face an increased monthly payment, suggesting that mortgage payments could make up more than 40% of a homeowner's gross salary.

However, if you typically save money, you could see the bank pay you more as interest rates push up the amount they pay you back.