On the 2nd of November, the Bank of England raised the base rate from 0.25% to 0.50%, in an attempt to tackle inflation following the post-Brexit economic slowdown. The term interest rate refers to the amount that is due to be charged to the borrower as interest and it comes as a percentage of the loan in question. While the rise in interest rates won’t affect savers much, it might affect small businesses, first-time homeowners and mortgage payers.
As a result of the higher interest rates and worries over the consequent slowing down of the economy, retailers are growing more and more anxious over people’s sending money, especially so now, during the run up to Christmas. Many families find this time of the year particularly stressful, as buying presents, as well as food and drinks, puts a lot of pressure on the finances of the household. To understand how much the recent announcement will impact buyers and retailers alike we have asked the following question to an anonymous panel:
Given the recent increase in the Bank Of England base interest rate do you think you will be spending more, less OR about the same in the shops, in the run up to Christmas?
We received a great response, with 1545 people giving their opinion and showing how important this topic is during these uncertainty filled times. Both retailers and families alike might be happy to know that the poll show an overwhelming 82% of respondents predicting they will be spending the same average amount as the past years, 4% saying they would spend more and 14% voting they would spend less.
The results clearly show that the rise in interest rates will not impact Christmas spending as much as many retailers feared it would. HSBC’s James Sawley declared: “It’s a squeeze of sorts, of course, but not at a level which would have a knock-on impact for retailers on the high street”. While this might be reassuring, other experts have considered the sole psychological effect of the announcement as a worrying sign for future spending and many retailers have started selling Christmas products and launched sales back in October to make sure the interest rates did not affect their turnover.
2017 has seen a 43% rise in discounted products in October, which is a very uncharacteristic move according to shopping experts. This also shows, however, that this climate of uncertainty might push planning over last-minute buys. This might mean that while people might be spending the same average amount as the past years, they might be doing so gradually.
What are your thoughts on the rise of interest rates? Will you be spending more or less this Christmas?