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How is the Rise in Inflation Affecting Investors?

In July 2018 the UK’s inflation rate rose to 2.5% for the first time since November 2017. Whilst this was predicted by the Consumer Prices Index, consumers noticed a significant increase in the price of petrol and public transport tickets.

Consumers have been understandably aggravated by inflation taking a toll on their income, and investors may be worrying about their savings during this period of economic change.

Should investors be concerned?

In simple terms rising inflation can lead to slower economic growth, which can signal bad news for investors. Savings accounts are often the worst hit by inflation, with many investors experiencing an increase in fees. Furthermore, fluctuations in interest rates can have a weighty impact on investor’s capital, particularly against investments with variable rates.

Despite not reaching a catastrophic rate yet, there have been moments in history where high inflation has caused serious economic turmoil. The recession of the early 90s saw inflation hit double figures and interest rates rising as high as 15%. More recently the Great Recession of the late 00s saw inflation reach 5.2%.

Whilst 2.5% inflation is not on par with events of the past, there is potential for it to increase. Whilst some experts are predicting this will not happen, many investors are analysing their investment portfolios as a precaution should the economy nosedive.

An alternative property investment

Property is a popular investment and has been for decades. It is considered one of the most reliable areas to invest and offers investors the chance to diversifying their portfolio whilst offering a regular income. Despite the government’s policy on quantitative easing to kick-start the economy, investors can put money into property that will grow in value enough to offset inflation or provide an income that exceeds it.

Most investors are opting for a diverse portfolio and a spreading their capital across a variety of investment opportunities. This helps investors achieve an equilibrium between risk and return and will go some lengths to protect them as the economy and markets change.

One online leader giving investors an alternative way to invest their money is Wellesley. The Wellesley Property Mini-Bond, issued by Wellesley Finance Plc, offers investors the opportunity to invest their money into property backed loans acquired by Wellesley and in return receive a fixed rate of up to 6.00% per annum gross paid monthly or at maturity.   

It is important to note, that as with most investments investor’s capital is at risk and interest payments are not guaranteed. Property investments may not always go to plan and may suffer from delays or reduction in the value of the assets. Investment through Wellesley is not covered by the Financial Services Compensation Scheme (FSCS).

The future of inflation

Due to a recent weakness of the pound many experts are predicting that the current rate of inflation may remain at 2.5% for the coming months. With well under a year to go until Britain leaves the EU, Brexit-related uncertainty is fuelling uncertainty and experts are warning investors that the UK could remain in the economic slow lane beyond Brexit which could affect their liquid assets.

In contrast, the Bank of England has set a goal to lower inflation to 2% by the end of the year. Financial authorities claim this could become a reality as Brexit becomes clearer and a predicted price war on the high street levels data out.

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The Wellesley Property Mini-Bonds are issued by Wellesley Finance Plc. Your capital is at risk and interest payments are not guaranteed. Investment is not covered by the Financial Service Compensation Scheme (FSCS). The Property Mini-Bond is non-transferable and cannot be held within an ISA account. To view the full risk statement click here.
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The contents of this article are for reference purposes only and do not constitute financial or legal advice. Independent financial or legal advice should be sought in relation to any specific matter. Articles are published by us without any knowledge or notice of the circumstances in which you or anyone else may use or rely on articles or any copy of the information, guidance or documents obtained from articles. We operate and publish articles without undertaking or accepting any duty of care or responsibility for articles or their contents, services or facilities. You undertake to rely on them entirely at your own risk, and without recourse to us. No assurance of the quality of articles is given or undertaken (whether as to the accuracy, completeness, fitness for any purpose, conformance to any description or sample, or otherwise), or as to the timeliness of the publication.
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