You are here: Home - News -

Households feel the pinch as inflation outpaces pay growth

by:
  • 15/08/2018
  • 0
Britain’s inflation rate rose to 2.5% last month, meaning price increases are now outpacing wage rises.

 

The cost of transport, petrol, food products and computer games pushed UK consumer price inflation (CPI) up from 2.4% in June, according to data from the Office for National Statistics (ONS).

This marks the first rise of 2018 and is the 18th consecutive month CPI has overshot the government’s 2% target.

Figures published earlier this week show wage growth has fallen to a nine-month low of 2.4%, meaning UK workers are now failing to make more than the rise in prices each month.

“This is squeezing households and will in turn have a knock-on effect on consumer spending and the UK’s economic growth,” said Laura Suter, personal finance analyst at investment platform AJ Bell.

 

The pinch point

 

Households were already feeling the pinch from the Bank of England’s decision to raise interest rates this month, which saw many banks increase mortgage rates, but fail to pass on the hike to savers.

Ed Monk, associate director for personal investing at Fidelity International, said: “While the latest economic data doesn’t make for good reading, hopefully it will spur on more households to start seeking real returns on their savings, to mitigate the impact of higher mortgage payments and falling real wages. The best avenue for this is the stock market and for anyone unsure about the potential benefits, our calculations show that if you had invested £20,000 into the FTSE All Share index over the past ten years you would now be left with £44,378.”

Suter added: “The high inflation figures continue to clobber savers who are in many cases losing money on their savings in real terms. No easy-access savings accounts pay anywhere near as much as inflation, and banks stubbornly refuse to pass on all of the interest rate hike announced by the Bank of England earlier this month.

“Cash savers can find better deals by using high interest current accounts or regular savings accounts, although these often have caps on balances and require the transfer of direct debits. However, a few minutes spent shopping around for a better deal can stop savers’ money being eaten away by inflation.”

There are 0 Comment(s)

You may also be interested in

Business Skills

In this section, we offer short ‘how to’ guides on harder to crack areas of business. From social media, to regulation or niche product areas, we cover it all.

Profiles

Our journalists interview key industry entrepreneurs, strategists and commentators for day-to-day market insight and a strategic view of where the industry is heading. We offer lessons for success and explore the opportunities for your business

Success in Practice

Here, we share case studies fleshing out best practice to help you decide what could work for your business. Take a look at how others approached complex tasks like launching a new mortgage lender, advising on a new product area or deciding to specialise in another. Learn from others mistakes and triumphs.

Marketwatch

Each week, we ask top mortgage and property commentators with a unique perspective to examine a key news headline, market move or regulatory or political issue.

Poll

Vote in our weekly poll here. It’s your chance to tell us what you think and be heard on the top news stories of the week. Review our archive to find out what your industry really thinks and all our coverage of the results.

Top Comments

Be part of the conversation on Mortgage Solutions. We want to hear from you. We have a tool called Disqus to tell us which stories get the most comments each week. Every Friday, the team picks the most thoughtful or opinionated contributions from our readers to enjoy again. Don’t forget to share your favourite stories from the site on social media to keep the conversation going.
Read previous post:
Banks must now display customer service ratings

Banks will now have to publish customer satisfaction ratings on their website as part of new measures to boost competition.

Close