Research carried out by think tank the Resolution Foundation has suggested that recent rises in interest rates have caused household wealth to fall by £2.1 trillion over the past year.
According to the research, UK households have experienced a ‘wealth boom’ in recent decades – total household wealth rose from 300% of national income in the 1980s to 840% by 2021.
However, a series of interest rate rises have caused mortgage rates to increase, house prices to fall and the prices of corporate bonds to decrease. The Resolution Foundation found that total household wealth has now fallen to 650% of national income – representing the biggest fall as a share of GDP since the Second World War.
The Resolution Foundation also highlighted that there are winners in regard to higher interest rates, mainly younger generations.
Commenting on the issue, Ian Mulheirn, Research Associate at the Resolution Foundation, said: ‘Over the past four decades wealth has soared across Britain, even when wages and incomes have stagnated. But rapid interest rate rises have ended this boom and brought about the biggest fall in wealth since the war of £2.1 trillion.
‘Those with significant mortgages will be hit by these major changes. But there are winners too from a shift to a world of higher rates and lower wealth. Higher returns will make it far easier for younger people to save for a pension that delivers a decent standard of living in retirement, while lower house prices will make it easier for younger generations to get on the property ladder and others looking to trade up.’
17/07/2023
View all >
08/05/2024
New customs rules cause confusion
The new customs checks and charges that came into force on 1 May are causing confusion and uncertainty for business, warns the British Chambers of Commerce (BCC).
READ MORE
UK will see slowest growth in G7 next year
The UK will see the slowest growth of the G7 nations next year, the Organisation for Economic Co-operation and Development (OECD) has warned.
UK's economic confidence rose in April
Optimism amongst UK business leaders in regard to the UK economy rose in April 2024, data published by the Institute of Directors (IoD) has revealed.
Sign up to keep in touch to receive our latest news and industry updates.
* *
Yes, I would like to receive email updates providing me with the latest finance news, advice guides and details of future events.