How might Base Rate changes affect your wealth planning?

Following a change in the Bank of England base rate, it could be valuable to take some time to understand what it may mean for you and your circumstances. 

Whether you’re looking to grow your wealth, review your investments or consider your borrowing, it’s important to consider how a changing rate environment can bring new considerations for your wealth planning. 

Exploring Fixed Term Deposits

If you don’t require immediate access to all your cash, you may wish to explore Fixed Term Deposits and the certainty of fixing your return for an agreed term. 

Committing a certain percentage of your cash to fixed-term savings could be a sensible way to balance risk. A Coutts Fixed Term Deposit Account allows you to fix the rate on your funds for a timeframe of your choosing – from one month to five years or longer – and in a range of currencies, which may work for those concerned about future changes in the Bank of England Base Rate.  

The Private Fixed Term Deposit Account is available to all our Coutts Current Account clients but must be held in the same currency as your current account. Early closure is not permitted during the term of your deposit. Over 18s only. 

Coutts Deposit Interest Calculator

The Coutts Deposit Interest Calculator helps you see how your cash could grow across our range of savings and deposit solutions. 

You can use the Calculator to find the right savings account for your needs; work out how much you have to save, and for how long, to reach your goals. 

How the Base Rate change could affect lending 

• Base Rate Tracker mortgages

A Base Rate Tracker mortgage has a flexible interest rate linked to the Coutts Base rate. This is not the same as the Bank of England Base Rate but has historically moved in line with it. If the Coutts Base Rate changes, the interest rate payable on your mortgage will change too.

A Base Rate Tracker provides flexibility, but a change to the Coutts Base Rate can be a useful moment to review your arrangements and consider whether it continues to meet your needs. At this point, you may wish to contact us to discuss your options – which may include moving to a fixed-rate mortgage. 

• Fixed-rate mortgages

Fixed mortgage pricing is influenced by swap rates and market expectations for future interest rates rather than directly by the Bank of England Base Rate. So, when considering whether to fix, it’s helpful to weigh the value of certainty over your monthly payments and speak to your Private Banker to establish what works best for you. 

Your home may be repossessed if you do not keep up repayments on your mortgage. Over 18's only.

• Investment Backed Lending

Changes in the interest rate environment can also affect the cost of Investment Backed Lending. However, as with other forms of borrowing, the headline interest rate is only one consideration. 

Investment Backed Lending allows eligible clients to borrow against eligible investment assets, providing access to liquidity without necessarily having to sell those investments. This can be taken as a fixed advance or a flexible overdraft that can be drawn down digitally at your discretion. 

Its flexible nature can make it relevant for short- and medium-term liquidity requirements across a wide range of purposes. But the cost and expected duration of borrowing should be considered alongside your investment position, liquidity needs and wider financial circumstances. This can help provide a more complete view of whether borrowing against investments is appropriate for your individual circumstances, rather than considering the cost of borrowing in isolation. 

The final decision whether to proceed must be your own and, in making your decision, you should carefully consider the comparison between borrowing costs and potential investment gains/losses.

Criteria applies.

How the Base Rate rise could affect investments

It’s important that your cash and investment strategy remains aligned to your long-term objectives. In the face of rate changes, it is important to speak to your Private Banker about achieving the right balance between cash, investments and liquidity, and to ensure you get more of your wealth working for you through a diversified investment strategy. 

The value of investments can fall as well as rise, and you may not get back the full amount you invest.

A timely review of any assets you hold elsewhere could be in order to consider whether a more consolidated approach could help you achieve your goals. If this suits your particular circumstances, your adviser is available to discuss the advantages of bringing your investments together. 

Please speak to your Private Banker to discover how Coutts could support your long-term financial goals.