Benefits of higher interest for savers should not be ignored after the Bank of England once again lifted Britain’s base rate last week, Shore Capital analysts have stressed.
“UK borrowers are already feeling the pain,” the broker acknowledged in a note, “but we should not overlook savers’ benefitting.”
Aside from this, positive trends appear to be emerging for the economy as a whole, analysts continued, adding things should well improve from here.
Following the central bank’s latest 25 basis point bump in UK interest to 5.25%, Shore Cap suggested the most aggressive hikes were behind us as inflation looks to be subsiding.
An optimistic stance on the economy can therefore be taken, with interest potentially nearing a peak - marking a silver lining for mortgage holders – unemployment remaining low and wage increases maybe outdoing inflation late this year.
Falling inflation is a good sign, Shore Cap noted, with any slip into recession likely to be limited to around a 1% fall in gross domestic product (GDP), as policymakers focus on limiting further price rises.
Given the tight labour market in the UK, where over one million job vacancies remained in June and unemployment sat below 4% as per official figures, consumers should keep spending cautiously, analysts said.
Alongside this, “wage growth may exceed consumer price index by the calendar year-end and so […] British living standards may then be rising,” they added.
Though the housing market is among the sectors remaining under pressure, the likes of retailers can rest assured on an improving outlook, according to Shore Cap.
Given a “prepare for the worst, hope for the best” mentality, many companies could well be positioned “satisfactorily for what may be ahead”, analysts said, pointing to the likes of Next PLC (LSE:NXT), Marks and Spencer Group PLC (LSE:MKS) and ScS Group PLC (AIM:SCS).
“Indeed, with base rates plateauing, rising living standards and fulsome employment, could things only get better,” Shore Cap asked rhetorically.