In the wake of the recent historic vote to leave the European Union, many questions remain both unasked and unanswered.
As the impact of the deciding is felt severely across the board economically and in the financial markets, many are considering the impact of Brexit on their personal finances. As part of that, and taking into consideration planning for an uncertain future, what will the impact be on savers?
One of two key concerns for savers are interest rates. Although the Bank of England has long hedged its bets regarding a rise in rates, many thought that a small increase was expected before the end of 2017. The Referendum campaign saw the Bank keep rates at 0.5%, and freeze it’s quantative easing program at £375bn. However, the key Monetary Policy Committee (MPC) hinted that it’s decision to raise interest rates still stood, stating that ‘it is more likely than not that the Bank rate will need to increase over the forecast period’.
As the value of sterling fell, along with the value of shares and UK financial interests, the UK became initially a less attractive place for investors, foreign or domestic. Swift action from financial leaders sought to reduce those gears, and to restore faith in the British economy. With less investment, the case for a rate rise was clearer.
The volatile financial market also gives a plausible case to lower interest rates further. The MPC next meets in July, and will consider interest rates then. If the decision is to lowers interest rates, then borrowers will benefit more than savers. Alternatively, an increase in interest rates will be beneficial for savers.
The second major issue for savers is stability of the financial market and investments. What has been seen currently are dramatic falls across the board. This was predicted by many, and will only carry on. However, in the long term, it is unlikely that such a fall and decline will continue indefinitely. Quite the opposite: as a Brexit deal is negotiated, more confidence and stability will return.
As the new relationship between the UK and the EU is arranged, and as the UK adjusts to its new found status, with new trading arrangements and partnerships across the worlds, it is expected by many that the economy will recover, and grow. Indeed, according to one of the largest investment platforms, Hargreaves Lansdown, it is impossible to know any of the long-term economic implications of any Brexit. According to a spokesman, “we cannot assume an Out vote will be bad for the long-term prospects of the stock market.”
As such, any savings, or assets, or investments are likely to be negatively impacted over the next few years. Any short term bonds or assets may not perform as expected. Investing in more longer term options or bonds would be a much safer bet.
Any savings issues should always be discussed with a financial professional – especially at this time of uncertainty. What is certain is that there is trust and confidence in the UK economy – which will translate into long term advantages and benefits for savers.