As the cost of living crisis continues to squeeze the pockets of many and the Bank of England increases interest rates to 1.75%, the biggest rate rise in 27 years, there’s more strain on consumers and borrowers across the country. 

While this rate is still well below historical averages, it will undoubtedly cause alarm for the younger generation as they are yet to live through such an inflationary environment. Whereas those adults who have previously experienced recessions, such as that of 2007, are often able to view their finances from a longer-term perspective as they have seen markets bounce back. 

What does the current inflationary environment mean for personal finances?

For some time, mortgage borrowers have benefited from low rates. However, the last few months have seen a dramatic rise in repayments due to resign interest rates. According to Moneyfacts, a 0.5 percentage point rise in the current average standard variable rate of 5.17 percent will add £1,400 to a total home loan bill over two years, based on a £200,000 repayment mortgage. While some homeowners will be able to afford this, others will struggle, especially as other soaring costs such as energy and food prices continue to bite. 

On the other hand, rate rises can be good news for savers, who will earn bigger returns on their cash. However, few banks are yet to have passed on these increases in full to savers following successive Bank of England rate increases. With top saving rates just shy of 2 percent, significantly lower than inflation, savers are still losing money in real terms. At the same time, the number of people able to save is declining, with research from MoneySuperMarket showing one in four Brits have zero savings due to the cost of living crisis. 

What does this mean in terms of how we communicate?

First and foremost, regular and transparent communication is key. In an inflationary environment where things are moving so quickly, providers need to ensure they are providing their customers with all of the information they need to make well-informed decisions. Simple steps such as creating toolkits, calculators, and proactively communicating with customers on how these rate changes could impact them will go a long way. 

It’s also important to consider the use of different strategies and channels to target different demographics. For example, understanding how to blend paid, owned, and earned media channels to build a comprehensive strategy and reach your target audience is crucial to a brand’s success. 

Similarly, think about who your audience is and how they like to engage, whether that be on TikTok, Facebook or LinkedIn. Particularly during uncertain times like these, there’s a huge opportunity for brands to create and foster communities, to help customers feel socially connected and help each other through. Brands like Monzo are leading the charge here as their business model and approach is built on financial inclusivity. However, we know that people consume information from multiple channels and platforms, so there is the opportunity for brands to become a consumer champion in their own unique way. 

With inflation set to rise further and a growing number set to be impacted by the cost of living crisis, businesses must put their customers at the heart of their decisions. Authenticity should lie at the heart of this, as customers seek trusted human voices during times of need.

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