IN JULY 2018 the UK’s inflation rate rose to 2.5 per cent for the first time since November 2017.
Whilst this was predicted by the consumer prices index, consumers noticed a significant increase in the price of petrol and public transport tickets.
Consumers have been understandably disgruntled by inflation taking a toll on their income, and investors may be worrying about their savings during this period of economic change.
Should investors be concerned?
In simple terms rising inflation can lead to slower economic growth, which can signal bad news for investors. The impact of inflation on investors can cause headaches in the form of savings accounts being subject to interest fees. Furthermore, a reduction in interest rates could have a significant impact on capital, particularly against investments with variable rates.
There have been occasions in the past where high inflation has caused economic turmoil. The UK’s recession spanning 1990 and 1991 saw inflation hit double digits and interest rates rise as high as 15 per cent. Similarly, The Great Recession of the late 00’s saw inflation hit 5.2 per cent.
Whilst not yet at a challenging level, there is potential for inflation to rise above the current 2.5 per cent. Whilst some experts are predicting this will not happen, many investors are analysing their investment portfolios as a precaution should the economy nosedive.
An alternative property investment
Bricks and mortar has forever been viewed as a sound investment. Property investment offers the chance to add diversification to a portfolio whilst offering a regular income. Despite the government’s policy on quantitative easing to kick-start the economy, investors can put money into property that will grow in value enough to offset inflation or provide an income that exceeds it.
Having a diverse portfolio, where your money is spread across a variety of investments can help you achieve the right balance between risk and return, regardless of what is happening in the economy and markets.
One online leader giving investors an alternative way to invest their money is Wellesley. Their Wellesley Property Mini-Bond, issued by Wellesley Finance Plc, offers you the opportunity to invest your money into property-backed loans acquired by Wellesley and in return receive a fixed rate of up to six per cent per annum gross paid monthly or at maturity.
It is important to note, that as with most investments your capital is at risk and interest payments are not guaranteed. Property investments may not always go to plan and may suffer from delays or reduction in the value of the assets. Investment through Wellesley is not covered by the Financial Services Compensation Scheme (FSCS).
The future of inflation
Experts believe that due to the recent weakness of the pound, inflation may remain at 2.5 per cent for the next few months. Brexit-related uncertainty is fuelling matters and investors should be prepared that the UK could remain in the slow lane of economic and global growth which could affect their liquid assets.
In contrast, the Bank of England has set a goal to lower inflation to two per cent by the end of the year. Financial authorities claim this could become a reality as Brexit becomes clearer and a predicted price war on the high street levels data out.
Click here for more information on Wellesley.