Rates skyrockets and smacks the U.K.’s wealth, but hold your horses! The younger crowd might just strike it lucky – as per a mind-blowing report.
Crikey! Interest rates have gone bonkers, causing a whopping 2 trillion pounds to vanish from British households’ wealth in the past year. The plummeting house prices and bond values have hammered pensions right in the kisser, according to a report that dropped on Monday.
But, blimey, it’s not all bad news! The Resolution Foundation think-tank has gone and said that those young whippersnappers might actually benefit from this wibbly-wobbly decline in household wealth. How about that, eh?
The Bank of England has been jacking up borrowing costs 13 times in a row since December 2021, pushing its base rate from a measly 0.1% all the way up to a jaw-dropping 5%. And brace yourselves, because they’re likely to keep pushing those rates up to tackle the sky-high inflation that’s got the Group of Seven nations in a right tizzy.
Now, hold your horses, because the future of interest rates is about as predictable as the British weather. “This whole rate surge might be a one-off hiccup, or it could be the start of a whole new ball game for the UK,” said Ian Mulheirn, Research Associate at the Resolution Foundation. Either way, the folks in charge ought to focus more on figuring out how to protect households from these wild ups and downs that are well beyond their control.
According to the Resolution Foundation, a whopping 2.1 trillion pounds (that’s a staggering $2.75 trillion, folks!) has vanished into thin air when it comes to household wealth over the past year. Can you believe it? This massive blow comes right after a mind-blowing surge in wealth over the last few decades, taking the total to a whopping 17.5 trillion pounds back in 2021.
Talk about a bummer! This decline represents the biggest nosedive in wealth as a share of the country’s economy since World War Two. Can you imagine? It went from a jaw-dropping 840% all the way down to 650% by early 2023.
Now, if these rates keep skyrocketing, it’s going to put the kibosh on a 40-year asset boom that has been driving a wedge between generations. You see, the skyrocketing house prices have been a real godsend for the older crowd, but it’s left the young ‘uns high and dry. That’s just not cricket, if you ask me.
But hold your horses, because there might be a silver lining for the young guns. The Resolution Foundation says that higher rates could actually do them a solid when it comes to their pension savings. Who would’ve thought, right?
“In these topsy-turvy times, when the older folks tend to be hogging all the assets, we might just see these rising interest rates leveling the playing field,” said Mubin Haq, the chief executive of abrdn Financial Fairness Trust, which supports efforts to tackle financial problems. They’re also partners with the Resolution Foundation, mind you.
So there you have it, folks. Rates going through the roof, wealth taking a nosedive, and a glimmer of hope for the young ‘uns. It’s a real rollercoaster ride, ain’t it?
(Phew, those rates are enough to make your head spin! Who needs that kind of drama?)