Prepare for the Pound to be worth less than one Euro
Published: 12 October 2009 By Chris RayFollow me on Twitter 1 Comment
Interest rates will remain low for at least another year, and will then only rise to 2% in 2014, a government think tank is predicting. This is likely to drive the Pound lower than one Euro.
Home owners will be rejoicing that their mortgage payments will be at these low levels for some time to come.
Investors in the stock market could be rejoicing as well, as low interest rates will force the value of the Pound down even further. A devalued Pound encourages export sales, boosting manufacturing and profits, and therefore makes shares more attractive to investors.
So Bank of England rates remaining at 0.5% is good news isn’t it? Well yes and no, actually.
The Pound is predicted to fall to less than $1.40 and the Pound could also soon be worth less than one Euro.
This makes any trip abroad very expensive. Whilst that may just be OK for holidays, what about those pensioners who set up home in places like Spain for their retirement years?
These people draw their income from UK based pension schemes in Sterling, but have to pay their day to day living costs in Euros. A falling Pound hits these people hard. Although currency cards can help reduce foreign exchange costs, many will have to return back to Blighty as they just cannot afford to live abroad any more.
So low interest rates will benefit a lot of people in the UK, but as you pay that low mortgage bill every month, give some thought to those who rely on savings accounts and Sterling based pensions. Their problems are probably just beginning.
Hi
I think the recent rapid shift in wealth and economic power (both personally and between nations) is good and bad.
Pros are that there will be a higher standard of living in Asia and inequality will be reduced as Amaerica and the UK won’t be able to rely on importing so many manufactured goods in the future.
The Cons are that instability can bring about cries of “unfairness” or that some groups in society have been disadvantaged (such as savers). One con is that people may see less value in ‘working’ in the future when it appears some Bankers and Financiers have pretty much behaved in a manner which forced the Bank of England into printing more money. “Why work when you can print money?” (I know this leads to inflation but it’s still good for the printers of the money but bad for everyone else)
Anyone else have any views ?