Which statement best describes the effect of rising interest rates on borrowers and savers?

• A. Higher loan costs; potentially higher savings yields; overall borrowing becomes more expensive while some savers benefit
• B. Lower loan costs; lower savings yields
• C. No impact on loans or savings
• D. Only affects mortgage rates

Answer: (A)

Rising interest rates affect both borrowers and savers: borrowing costs increase while savers can earn higher yields on deposits. When rates climb, lenders charge more for loans—mortgages, auto loans, credit cards, student loans—so borrowing becomes more expensive. At the same time, higher rates push up the returns on savings and new deposits, so savers can benefit from better yields. This dual impact is why the statement describing higher loan costs along with higher savings yields and overall more expensive borrowing while some savers benefit is the best description. The other options miss this combined effect: they either suggest costs and yields fall, claim no impact, or over-simplify to only mortgage rates.