Source: Experian, September 2022, What Will Your Mortgage Payment Be at 6%? - Experian
At 6% you are paying nearly £7,000 more a year than if your rate of interest was 3%.
Don’t have a mortgage?
You may be breathing a sigh of relief if the above section doesn’t apply to you. But even if you have savings rather than a mortgage, don’t assume there’s no need to look at your finances. The interest rate being paid on savings accounts will tick up as the base rate increases, but this is unlikely to keep up with the rate of inflation, which means your savings could be losing value in real terms.
Don’t lose your fortune
Your personal fortune is whatever sum you have worked hard to save, it doesn’t have to mean millions. You’ll want to do what you can to make sure it doesn’t lose value. But with a backdrop of high inflation, recession, continued cost of living crisis and conflict in Ukraine, it is challenging to know where to put your money. This is when professional advice has the potential to help you understand what you want to achieve with your money, and explore ways in which you can work towards those goals.
There are opportunities…
It is a challenging environment for all companies, as the costs of their raw materials increase along with the cost of their energy. Businesses do not enjoy the same protection of the energy price cap that applies to consumers, nor do they receive government grants like UK households are currently benefiting from. However, for cash-rich companies, rising interest rates are good as it means they can invest their cash and earn interest. This could put them in a stronger position to bounce back when the economic backdrop is more favourable.
…if you know where to look for them
The challenge for investors is doing the research to identify companies that are holding cash, and that they are being sensible about how they are investing it. Active fund managers have access to management teams to ask companies about their finances, and they also have experts who can analyse company accounts to make informed decisions about the health and prospects for individual businesses.
As well as having the expertise to find the companies best placed to survive and prosper from the current difficult economic backdrop in the UK, active fund managers will also be looking further afield, to economies that might be faring better than the UK.
It is a challenging time for consumers and investors, but if you do have savings, now could be a good time to revisit where you have them and what you want to use them for. The financial backdrop is different now to six months ago, and a review of your current situation may highlight changes in your goals as well as changes in the best way to work towards them.
Sources:
(1) Bank of England, 8 December 2022 When will inflation in the UK come down? | Bank of England
