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Brexit one year on: what it’s meant for your money

Pound continues to flounder as inflation soars

A year on from the Brexit vote, it’s fair to say it’s been a rollercoaster ride for the British economy.

Whether you’re a saver, an investor or you’re simply looking forward to your summer holiday – you’re bound to have felt some financial impact over the last year.

Here, we explain in simple terms exactly what’s happened in the world of personal finance since the referendum last June.

1. The value of the pound has slumped

Last year’s EU referendum brought about a sharp drop in the value of the pound, and while there have been brief recoveries along the way, the currency remains vulnerable.

Right now, the pound is down 15% against the dollar, and 14% against the euro, when compared to pre-Brexit vote levels.

While this is bad news for holiday makers, the weakness of the pound is good news for UK investors with interests abroad, and overseas investors in the UK.

What does this mean for me?

A weaker currency means you’ll get less bang from your buck when you go abroad – so your summer holiday might cost a bit more than you’ve bargained for.

We’re here to help, though. Our advice on getting a good deal on currency, be it through high street exchanges or prepaid cards, should leave you a little better off this summer.

2. Inflation is at a four-year high

Earlier this month, inflation hit 2.9% – the highest level in four years, with the rising price of food, clothing and holidays among the main factors.

In May last year, the month before the referendum, inflation was at just 0.3%.

What does this mean for me?

As well as having less money in your pocket in real terms (more on this shortly), soaring inflation is bad news for savers, as there are currently few products out there that can keep up with it.

That said, it’s not impossible for savvy savers to get a good deal.

From regular cash savings products and high-interest current accounts to investments and peer-to-peer lending, our advice on protecting your savings against inflation can help your money go further.

3. Household incomes are falling in real terms

High levels of inflation mean that household incomes are falling, as price growth outstrips wage growth.

According to data from the Office for National Statistics, real wages grew by 2.1% in the three months to April, well below the level of inflation.

What does this mean for me?

Unfortunately, it means your day-to-day essentials cost a bit more, so you might end up with less money in your pocket.

If you’re feeling the squeeze and want to cut your outgoings, or perhaps pocket an extra few pounds, our guides on 50 ways to save money and 50 ways to make money are loaded with top tips.

4. A base rate increase could be on the horizon

The prospect of increasing the Bank of England (BoE) base rate, which is currently at an historic low of 0.25%, is often mentioned as an antidote to rising inflation.

While the BoE governor Mark Carney said earlier this week that ‘now is not yet the time’ to increase interest rates, there are growing calls to do so within the bank’s Monetary Policy Committee.

Earlier this month, three of its eight members voted to increase the base rate – most likely back to the previous level of 0.5%.

While it’s still likely that an increase won’t arrive until 2018, the prospect of one later this year now seems a plausible scenario – especially if inflation continues to rise.

What does this mean for me?

An increase in the base rate could in theory stave off the speed of inflation, but it would also bump up the cost of credit.

In the residential and buy-to-let sectors, mortgage rates are currently at the lowest levels in years, but a base rate increase could change this. Prospective homebuyers can protect themselves against inflation by considering longer-term fixed-rate mortgage deals.

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