The Office for Budget Responsibility (OBR) has released figures revealing that, in the UK, savers have benefited more from the recent rise in interest rates than mortgage holders have lost. Real household disposable income (the money that can be spent or saved) has in fact risen although it is forecast to fall again in 2024 as more fixed-rate mortgages face renewal. In addition, there is an estimated 1.6 million homeowners across the country who will move onto much more expensive loans when their current mortgage deal expires. Higher mortgage rates have been a major contributing factor in rapidly rising rents, so even those who do not hold a mortgage may feel the impact.
The Treasury’s official economic watchdog is forecasting a rise in debt interest payments next year, so even if the Bank of England decides not to raise interest rates beyond their current level of 5.25%, incomes will continue to be impacted. There is some good news, however, with the oversupply in the mortgage sector leading to more competition and providers cutting their rates. Despite this positive change, savings rates may have peaked, even at National Savings and Investments, leading to an increased risk of rate cuts on NS&I accounts and the Premium Bond prize fund falling.
Additionally, the Treasury Committee has accused larger banks of doing the bare minimum when it comes to loyalty rates for their customers while advising customers to continually shop around for the best rates. Chancellor Jeremy Hunt has spoken of National Insurance cuts in January, raising state pensions by 8.5% and benefits by 6.7%, and a boost to minimum wages in April to help Britons pay their bills. Despite the positivity, however, many across the country are still feeling the pinch
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