Enable’s IFA’s of Bishop’s Stortford can see that once again it is the savers who will be disadvantaged by recent cuts in interest rates. “The lenders and the borrowers are doing just fine as interest rate fall and cheap mortgages and zero rate credit card deals abound. The plight of savers is the real tragedy,” says Claer Barrett is the editor of FT Money.
The cut may be small but for savers who have endured dwindling interest rates for years it looks as if they are stuck with them for longer, as rising inflation erodes the value of cash. Hargreaves Lansdown estimates that since 2008, savers have theoretically lost £160bn worth of interest payments (based on rates at 2008 levels).
So what can savers do? Claer Barrett suggests starting with looking at your mortgage, if you have an interest rate of less than 1 per cent then rates are unlikely to go up for some time so why not drop to the minimum repayment then with the cash saved instead of putting it into a savings account you could top up your pension with a monthly AVC (additional voluntary contribution) It is always worth exploring how much you can put into your pension. The annual allowance (capping what most people can pay in tax efficiently) is £40,000, although this could taper down to just £10,000 if your total income is over £150,000.
If you are thinking about how to balance your borrowing and saving to make the most of the current climate Enables IFAs in bishops Stortford can help talk you through your options.
YOUR HOME COULD BE AT RISK IF YOU DO NOT KEEP UP YOUR MORTGAGE REPAYMENTS
Source: FT Money