High interest rates in the United Kingdom have led to a “record” decline in British household wealth since World War II, according to a study released on Monday, but it could give a boost to those looking to buy their first home.
Rising interest rates on the back of inflation following the recovery from the pandemic “has reduced the wealth of households across the UK by £2.1bn over the past year,” according to a study by the think tank Resolution.
The center said the UK has benefited from “an unprecedented wealth boom in recent decades” while the total wealth of British households has increased “from 300% of national income in the 1980s to 840%, or $17,500 billion in 2021” , according to the agency. France Press.
“The rapid increase in interest rates by the British central bank since the end of 2021 has driven up mortgage rates and caused a decline in house prices, as well as prices for British Treasury bonds and companies,” the Center said in a statement. which specializes in anti-poverty policy.
Falling government bond prices have lowered the book value of pension funds, “traditionally the largest source of household wealth in the UK,” according to a study in partnership with the Abrdn Financial Fairness Trust.
Result: According to the study, the wealth of British households is now only 650% of British national income at the beginning of 2023, the biggest decline since the end of World War II.
Faced with inflation holding steady at 8.7% for one year in May and continuing to exceed expectations, the Bank of England raised interest rates for the 13th consecutive time to 5% in June, with markets expecting them to peak at the level of 6.5% in March.
This declining wealth of British households could reduce the “generational disparity” that has widened over the past 40 years as older generations benefit from a property boom while younger ones are dispossessed.
The continued rise in interest rates increases the pressure on the financial resources of families who have mortgages, because they are usually provided at a floating or fixed rate for only a few years.
On the contrary, these higher rates could drive down property prices and allow retirees to improve their standard of living by boosting pension fund income, the study says.
