Borrowers have benefited from low interest rates which have cut the amount they pay to service their debts. On the flip side, savers have seen paltry returns on their investments, making it even harder to build up a nest egg. Retirees also suffered, as low rates and QE depressed annuity rates, also denting retirement income.
The market expects an interest rate rise sometime in 2016, rather than in 2015, and BoE officials have stressed that the eventual hike will be gradual and limited. However, as a report by the Social Market Foundation shows, the rate rise will create new losers.
After the financial crisis, lower income earners were less able than other groups to save and pay off their debts. This was driven by food and energy prices, and the fact they're less likely to be mortgagors who benefited from low rates.
As such, individuals in the low income group are less financially secure than their peers, which makes them more vulnerable to a rate hike.
"In 2005, those on the top incomes had almost 10 weeks’ worth of income in savings; those on the top incomes by 2012-13 had an extra 4 weeks’ worth on top of this," the report said.
"In contrast, among the lowest incomes, savings have fallen, from just over two weeks’ worth of income to less than six days’ worth of income."
If interest rates do rise sometime in 2017, mortgagors will find their spending power particularly pinched. Not only will their monthly mortgage repayments increase, but they'll be forced to make difficult financial decisions.
On the one hand, mortgage holders would've seen the value of other financial debt increase in recent years. Those with other forms of debt now owe around £5,000, up from around £3,500 in 2005, a 36 per cent rise in real times.
Tighter budgets mean many will be inclined to dip into their savings pot, however this could also be problematic.
"Over three quarters of those with a mortgage have some savings, but the amounts saved are relatively small – equivalent to less than four weeks’ worth of income," the report said. "This compares to an average of 39 weeks’ worth of income in savings among those that own outright."
"26-35 year olds"
Numerous reports suggest that the young have been worse affected financial crisis, and when interest rates rise, there will be even more bad news.
They've found themselves with a particularly nasty lot in recent years. Average weekly pay for twenty and thirty-somethings fell more than any other age group between 2008-13, as housing prices have risen dramatically. Meanwhile, the groups' saving rates have suffered, while the value of their debts have swelled.
"The 26-35 age group are less well-prepared for potential interruptions in, or falls in income compared to the rest of the population," the report said.