According to Nationwide, further rate increases will dent consumer confidence. Despite the five interest rate increases over the past year, consumer confidence has remained strong and does not seem to have been rattled by previous events.
Many commentators agree with Nationwide’s theory and believe that any increase in the interest rate would not be good news for borrowers and would affect consumer confidence greatly.
Our view
Given the recent issues with Northern Rock, we suggest consumer confidence is perhaps worse than would have been expected. Expect an economic slow down. But expect demand for alternatives to cash such as market driven products to increase. Invest before it is too late.
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