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Peer2Peer Finance News | November 21, 2017

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Inflation and interest rates worry investors more than Brexit

Inflation and interest rates worry investors more than Brexit
Suzie Neuwirth

INVESTORS are more worried about inflation and low interest rates than they are about Brexit, new research claims.

A survey of over 1,000 UK savers and 500 high-net-worth individuals, commissioned by Rathbone Investment Management, found that 42 per cent of respondents saw rising inflation as a major threat, with the same amount believing that low interest rates are a concern.

In contrast, just 30 per cent saw Brexit as one of the biggest hurdles to building and maintaining wealth.

Earlier this month, the Bank of England hiked interest rates for the first time in a decade, increasing the base rate from its historic low of 0.25 per cent to 0.5 per cent. The move has already been fed through to borrowers with tracker mortgages, but does not seem to have benefitted savers yet.

Meanwhile, the Brexit-induced weak pound has helped boost inflation to a five-year-high of three per cent, far above the central bank’s two per cent target, putting added pressure on people’s purse strings.

26 per cent of respondents said that they had already been negatively affected by the rising rate of inflation, with a further 21 per cent concerned that it would impact them in the near future. Conversely, 10 per cent believed their finances had been positively affected by the rise in the cost of living.

Read more: RateSetter: BoE rate hike will have limited benefits for savers

Meanwhile, 69 per cent of investors said they did not see the UK’s upcoming departure from the EU as a substantial threat to their finances.

Outlooks were mixed, with 17 per cent of people surveyed saying they felt more positive about their finances than the previous year, while 18 per cent said they felt less confident.

“Brexit has dominated the political and economic agenda for the last year, and with negotiations starting to heat up, that’s unlikely to change any time soon,” said Robert Szechenyi, investment director at Rathbone.

“But in this climate of heightened uncertainty, it’s encouraging to see investors appreciate that there need not be a ‘bad’ Brexit scenario as far as their investments are concerned.

“So long as investors are vigilant and prepared to adapt and make sure their investment portfolio is diversified, they should be able to make positive investment choices which mitigate both the risks of Brexit and inflation.”