Households may face a further income squeeze, say experts

Sign up to our free money newsletter for investment analysis and expert advice to help you build wealth Sign up to our free money email for help building your wealth Sign up to our free money email for help building your wealth SIGN UP I would like to be emailed about offers, events and updates from The Independent. Go to website For those retiring, a relatively bright spot could be improved annuity rates which provide retirees with a guaranteed income for life and which are heavily influenced by gilt yields Jason Hollands, Evelyn Partners Matthew Ryan, head of market strategy at global financial services firm Ebury, said elevated gilt yields are likely “to be reflected in higher mortgage rates, which would provide a further squeeze on household disposable incomes”. If more worrying news comes out of the US, or fears of stagflation spread, bond yields could remain higher, and if this happens, there’s more of a chance it will be reflected in higher mortgage rates.” Jason Hollands, managing director of wealth manager Evelyn Partners, said: “Markets have essentially been factoring in a combination of stickier inflation, a more modest pace of rate cuts than hoped for only months ago, and, importantly, appear to be taking a dim view of UK growth prospects. “This all comes ahead of a year of anticipated significant new gilt issuance and is therefore clearly bad news for Rachel Reeves.” In the UK, weaker sterling will make foreign imports look a bit more expensive, potentially impacting some food and energy costs as well as meaning higher expenses for any US-bound holidaymakers Lindsay James, Quilter Investors He said the “big question” is whether the rise in borrowing costs is a temporary spike, “or proves to be more long lasting, resulting in a long-term shift in government borrowing costs. “These include the prospect of the Chancellor needing to engage in further tax rises, an increase in mortgage rates and, for those retiring, a relatively bright spot could be improved annuity rates which provide retirees with a guaranteed income for life and which are heavily influenced by gilt yields.” Lindsay James, investment strategist at Quilter Investors, suggested consumers may potentially see rising prices, with holidaymakers potentially affected by weakened sterling.