Surging interest rates have driven the biggest fall in household wealth in the post-war era, according to a new report.

The aggregate wealth of British households has dropped by £2.1 billion in cash terms, the report by the Resolution Foundation think-tank estimated.

UK households' wealth comprised 650% of national income in early 2023, down by nearly 200 percentage points since early 2021, the Foundation said.

The report highlighted that rising interest rates have caused the price of government and corporate bonds to plummet, reducing the measured value of pension assets - normally the biggest single source of household wealth in the country.

If higher rates remain, wealth could fall again to around 550% of GDP, ending the 40-year wealth boom, the report also found.

Ian Mulheirn, research associate at the Resolution Foundation, said:

"Over the past four decades wealth has soared across Britain, even when wages and incomes have stagnated. But rapid interest-rate rises have ended this boom and brought about the biggest fall in wealth since the war, of £2.1tn."

However, younger people may benefit from tighter monetary policy. Mulheirn explained:

"Higher returns will make it far easier for younger people to save for a pension that delivers a decent standard of living in retirement, while lower house prices will make it easier for younger generations to get on the property ladder and others looking to trade up."

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