The Bank of England governor’s statement that interest rates could rise six-fold in the next three years has been met with muted optimism by the boss of one of the world’s largest independent financial advisory organisations.
deVere Group’s founder and chief executive, Nigel Green’s reaction comes after Mark Carney told MPs on Tuesday that the bank rate could reach 3 per cent within three years. It is currently at 0.5 per cent, where it has been since the BoE halved the rate five years ago.
Mr Green comments: “This is, of course, another welcome positive indicator that the economy is recovering.
“Naturally, the forecast is also step in the right direction for anyone who has savings in a bank or building society – and especially for pensioners and others living off a fixed income. These savers, who represent the vast majority of the UK population, are the ones who have been hit hardest by the interest rates being at historic lows for so long.
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“However, with rates still not expected to reach even above 3 per cent before 2017, it makes for almost a decade of misery for British savers. As such, I do not expect the millions of hard-working Brits, who have been prudently putting money aside and who have been adversely affected by years and years of monumentally low interest rates, will be hanging out the bunting and popping the champagne corks just yet.”
Earlier this month, Mr Green said that he expected a growing number of British retirees to consider higher risk investments in order to receive a better rate of return as a direct result of the Bank of England’s prediction that interest rates are likely to remain low until the end of the decade.
He explained: “Tired of their cash holdings making them, in effect, poorer over time, I fully expect more and more retirees will turn traditional investment thinking on its head. An increasing number will, I believe, consider higher risk-higher return investment opportunities as part of a well-diversified portfolio in order to be able to fund the lifestyle in retirement they want to enjoy.
“Traditionally, the mindset has been that as we get older we should reduce our exposure to risk and, for example, increase holdings of cash and bonds. However, in today’s world this prudent intention could have serious unintended consequences.”