Rates Surge Hits UK Wealth, But Young People Might Gain  

• The jump in interest rates has wiped more than 2 trillion pounds off household wealth in Britain over the last year due to the fall in house prices and the value of bonds which has hit pensions, a report published on Monday showed.
• However, the Resolution Foundation think-tank said younger people could benefit from the partial reversal of the decades-long climb in the value of household wealth.
• The Bank of England has raised borrowing costs 13 times in a row since December 2021, taking its base rate from 0.1% to 5%, and it is expected to keep on raising rates to bring down the highest inflation among Group of Seven nations.
• "The current surge could be a blip, or herald a new era for the UK. Either way, policy-makers should focus more on whether and how to insulate households from wild swings in their fortunes from these forces well beyond their control."
• The Resolution Foundation said 2.1 trillion pounds ($2.75 trillion) had been lost in terms of household wealth over the last year after an unprecedented surge in recent decades which took wealth to 17.5 trillion pounds in 2021.
• The fall represented the biggest drop in wealth as a share of gross domestic product - from 840% to 650% by early 2023 - since World War Two.
• If interest rates stay high, the continued erosion of household wealth would end a 40-year asset boom that has aggravated generational inequality caused by rising house prices which helped older people but left out younger people, it said.
• Younger people could also benefit from higher pension savings rates, the foundation said.

(Source: Reuters)