Prepare for the Pound to be worth less than one Euro

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.

One Response

  1. Dave Argyle 12th October 2009

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