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Posted 13 September 2023

The impact of interest rate rises on UK consumers is not evenly spread.

Some consumers are benefitting, which is in turn causing their spending to remain resilient, which bolsters demand and ultimately keeps inflation persistent –  a tricky situation for the Bank of England.

Why is this the case? In essence, the impact of rate rises is highly dependent on homeowner distribution, essentially whether or not they have a mortgage. Many older homeowners, the ‘Grey Pound’ own their homes outright without mortgage liabilities. Rather than impacting their spending power through increased mortgage costs, many instead benefit from a boost to savings rate.

At the other end of the spectrum, those that are highly sensitive to interest rate changes, specifically households having to re-mortgage at a drastically higher rate, which can have a massive impact on their disposable income.

his is backed up by data. The charts show that the three oldest age groups returned to annual growth in discretionary income in April 2023 – the same age groups where a higher percentage of homes are owned outright.

Thank you Francesca Paver for the note.

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