Higher Interest Rates Could Benefit Young People, Says Resolution Foundation

The foundation argues that a "new normal" of higher rates could end a 40-year wealth boom that has been a key driver of intergenerational inequality.

Substantial increases in the cost of borrowing can help cool the property market, with more houses going on sale and buyers seeking to borrow less.

This, in turn, could lead to a decrease in the time it takes for first-time buyers to save for a deposit.

In the 1990s, it took just eight years to save for a 10% deposit, but the thinktank believes this could fall to 10 years with the help of higher interest rates.

While rising rates add to the cost of repaying mortgages, the foundation said this could be more than offset by a lower level of borrowing needed to buy a home, reducing the overall lifetime cost of property ownership for new buyers.

Younger workers may also benefit when it comes to pensions, as they can put away less and get more in return than previously.

In a low interest rate world, a typical worker needed to save roughly £5,000 a year to secure two-thirds of their income prior to retiring.

But now that the base rate has increased, just £3,000 a year needs to be saved to achieve the same result.

The report also notes that household wealth has fallen by £2.1 trillion over the past year, the biggest decrease as a share of economic growth (GDP) since World War II.

This is due, in part, to a key holding of pension funds - bonds (issued by governments to raise money) - falling in value and reducing the value of pensions.

Interest rates have been consistently hiked in an effort to bring down stubbornly high levels of inflation.

The Bank of England has forecast that rates will go above 6%, up from the current 5%, and stay around 5.5% until mid-2025.

This is intended to keep inflation in check and stabilize the economy.

However, the higher interest rates may also have unintended consequences, such as making it more difficult for people to get mortg