Young people are more likely to flip their cash savings into investments if interest rates fall, says Hargreaves Lansdown.
One in six (15%) consumers said they would move from savings to investments if rates fell, rising to 24% amongst those aged 18-34. In contrast, this figure is just 7% among over 55s.
In February, the Bank of England cut interest rates from 4.75% to 4.5%, with two members of the Monetary Policy Committee calling for a 0.5% reduction to 4.25%.
Emma Wall, head of platform investments at Hargreaves Lansdown, said: “Despite stubborn inflation, market consensus is that the Bank of England will cut interest rates further through 2025. There are of course two sides to every rate story, while corporates, consumers and even countries with leverage will welcome lower rates, savers won’t. The past couple of years have seen meaningful interest paid on deposit, a real return for many consumers after a near decade of negative real rates.”
Industry calls for scrapping the cash ISA in recent weeks hope these cuts will fuel investment into the stock market, but Wall does not agree.
“Any reform must focus on how we remove barriers to helping individuals save and invest to achieve their financial freedom, not add them. Only by doing this will we boost the level of investment across the UK and in turn, support the UK stock market and domestic growth,” she added.
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