Today the Bank of England increased interest rates from 0.25% to 0.5% for the first time in a decade. The hope is that this small increase will curb rising prices and prop up the pound.
Borrowers are likely to be shuddering at the news, while savers are expected to rush to the bank eager to cash in on the extra 25p for every £100 they save, but is this really the full story?
It’s true that anyone with a variable or tracker mortgage will end up paying more and loan or credit card repayments are likely to increase. On the other hand, the positive benefits for savers may take a bit longer to materialise: “Once the rates do eventually trickle down to customers, returns are still likely to be eroded by the rise in costs of goods even if inflation dropped to the 2% target”, Alex Neilson, Investment Manager explains.
Is now the time to start investing?
So with interest rates now at 0.5% how does saving compare to investing?
Performance between 1 Jan 2016 and Dec 2016
UK inflation rate on 2 November 2017
UK interest rates on 2 November 2017
Above is an overview of how our measured portfolio has performed between 1 January 2016 and 31 December 2016. This overview is a point of reference and is generally representative of investments. However, depending on your portfolio strategy, the above may not be representative of your portfolio.
All investment carries risk and it is important you fully understand these risks and willing to accept them. You may get back less than you invested.