In its continuing bid to curb inflation, the Bank of England raised interest rates for the 14th consecutive time today, increasing its base rate by a quarter of a percentage point to a 15 year high of 5.25 per cent.
Commenting on the increase, Chieu Cao, CEO of financial wellbeing provider Mintago has issued a rallying statement saying:
“Another interest rate hike, another sucker punch that will leave millions reeling.
“We can be sure employers and managers are seeing the headlines about those drowning in skyrocketing debt and repayments, but how many have actually taken action to support their employees through these challenging times? In fact, how many even know which of their staff are struggling with issues such as higher interest rates and the cost-of-living crisis?
“Unfortunately, too many businesses are not having the right conversations with staff – talking about financial stress remains a workplace taboo, and people’s wellbeing is being harmed as a result. But now is the time to step up. There is no use pointing the finger of blame at the Bank of England, government, banks or anyone else. Business leaders must understand the critical role they can play in supporting employees at this time – prioritising financial wellbeing over other light-touch perks and benefits is a must in the current climate.”
What the interest rate increase means for your people
According to the BBC, just under a third of households have a mortgage, according to the government’s English Housing Survey.
1.4 million people are on tracker and standard variable rate (SVR) deals. These people will see an immediate increase in their monthly payments.
Three-quarters of mortgage customers hold fixed-rate deals. Even though their monthly payments may not change immediately, the 1.8 million people expected to remortgage this year will have to pay a lot more than if they had taken out the same mortgage a year or more ago. As an example, an average two-year deal, fixed at 2.29% in November 2021, will now be above 6%.
Those with credit card debts and loans are also exposed. Lenders could decide to put their prices up further if they suspect higher interest rates in the future.
Meanwhile, interest being paid on savings is not increasing at the same rate as inflation, meaning those with cash savings are finding that their value is decreasing in real terms.
What employers can do to help
There are may ways that employers can help to support financial wellbeing beyond increasing pay.
Echoing Cao’s perspective, a timely new report “The Financial Wellbeing Guide 2023” produced by the National Forum for Health and Wellbeing at Work and Alliance Manchester Business School, points to an urgent need to break down social taboos around speaking about money and encourage employees to share their financial concerns with their colleagues.
The report offers practical ways to offer support without the need for making large investments.
Recommendations focus on the need for inclusive, proactive measures from management led campaigns to tackle stigma, to financial literacy programmes, to offering flexible working and ensuring equitable approaches to career progression and access to development programmes. All of these are vital when it comes to giving employees the opportunity to develop the skills they need to enhance their earning potential.
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