It’s 10 years now since the banking crisis led to plunging interest rates.
At the time of writing a 0.25% increase is expected. The first in a decade. Inflation has risen, albeit still at only 3%, and the Bank of England are expected to make a small interest rate increase.
Is this good news at last for savers?
Our view, is NO.
Rising Interest Rates, Inflation and Your Money
Small increases in inflation are probably down to Brexit worries causing a reduction in the value of the Pound. As Brexit solutions start to appear, over the next 18 months, the Pound will strengthen again. Of more concern to Governor Mark Carney, will be the incredibly high level of personal debt that exists in the UK population. Raising rates and unwinding Quantitative Easing are both a challenging and an unknown combination.
Expect one or possibly two, very small, testing the water, increases in interest rates.
It is difficult to view matters beyond 1-2 years. No one in the west has experienced this sort of environment before. Expect extreme caution, from the Governor.
For savers, the decade old problem continues. Even allowing for the imminent interest rate rise, interest rates will still give a return less than inflation. Money on deposit will lose its real value.
In this environment, Mark O’Neill, IFA and Chartered Financial Planner is the go-to chap.
Mark, of Jones Harris Chartered Financial Planners, has helped many of our clients work around this low interest rate world.
Contact Mark O’Neill at Jones Harris Chartered Financial Planning on: 01253 874255 or email: email@example.com