Updated 29 March 2022
The good news is that Covid restrictions are lifting and consumer confidence is beginning to return.
The bad news is that continued interest rates rises, energy bill hikes and rising inflation are destabilising any returning confidence, putting many families at financial risk.
The recent interest rate rise from 0.5% to 0.75%, the third rise in just four months, means interest rates are now at their highest level since March 2020.
There is a general feeling in the industry that inflation could top 8% this year, the highest level for decades.
It remains likely that more interest rate increases are on the horizon, making re-mortgaging from a fixed rate more expensive going forward.
Those on tracker rates or their lender’s standard variable rate - as well as those with other loan or credit card debts that are not fixed will see their repayments increase in line with rate rises.
This means about two million households are braced for higher mortgage payments, according to UK Finance. A typical tracker mortgage looks set to rise by about £26 a month, and a typical standard variable rate mortgage by about £16.
Savers have had a tough time for a while now and although rising interest rates should be good news, providers aren’t obligated to pass on base rate increases. It will be something to watch closely as providers may choose to start offering more attractive deals to win over new customers.
The impact on financial markets of an interest rate rise on the stock market is much less certain. In the recent past, share prices have fallen when the bond markets have fluctuated due to higher interest rate expectations.
Equity investors should expect a level of reaction to come as the stock market processes the latest interest rate news. If the market becomes too volatile this could sway more people away from investments and into higher interest rate bearing savings accounts.
Unbiased Founder and CEO, Karen Barrett, comments:
"It’s time for savers to get savvy. Seeking independent, trusted advice is the best way to ensure you are making the right choice for your circumstances.”