Ten years since the financial crisis, what’s happened to our finances?

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On Saturday (15th) it’s ten years since the investment bank Lehman Brothers went bust – and the start of the financial crisis. What’s happened to wages, investments, the FTSE 100 and savings rates since then?

Ten years since the financial crisis – wages have fallen

Average earnings are £760 a year lower now than they were in 2008. These figures come from the Institute of Fiscal Studies. It’s found that the average worker earned:

  • £24,088 in 2008 and
  • £23,327 in 2018.

People in their 20s and 30s were the worst affected. Those aged 50 and over are only slightly worse off in terms of earnings (hundreds rather than thousands of pounds).

Savings rates have plummeted

Savings rates have plummeted since the financial crisis. Figures from the Bank of England show that the average interest rate on a savings account was 3.1% in 2008. It’s now 0.31%. This drop in interest rates has happened for several reasons:

  • The Bank of England has reduced interest rates. Bank of England rates were 4.5% in September 2008 and are 0.75% now, having been 0.5% (with a brief dip to 0.25%) between 2009 and August this year.
  • The Bank of England introduced a Funding for Lending Scheme in 2012. This gave banks and building societies access to cheap money so they didn’t have to raise so much from savers.
  • The tax changes which meant that savers can now get £1,000 a year interest tax-free from savings (£500 if they’re higher rate taxpayers) diluted the market for cash ISAs.  Banks and building societies don’t seem to compete on interest rates in the way they did.

The stockmarket has risen

Figures show that £10,000 invested in the FTSE All Share index on 12th September would be worth £14,893 today if you hadn’t reinvested the dividends and £21,352 if you had reinvested the dividends.

BE AWARE: These figures don’t include the effect of charges. All investment funds levy charges and these vary from 0.1% a year to 1.5% a year or more.

SAVVY TIP: Dividends are a share of the profits. Bigger and older companies tend to pay dividends to shareholders twice a year. The level of dividend isn’t guaranteed from one year to the next. You can read more about dividends in my article called What are dividends. The FTSE All Share index is an index of the biggest companies in the UK. You can read more about the stock market indices in my article called

Government bond (gilt) yields have fallen

The UK government issues bonds, called gilts, to raise money. The government pays interest on these gilts in the same way that an individual or business would pay on a loan. Pension funds often invest in these gilts, especially when they are looking to produce a steady return, rather than one that has the ups and downs of the stock market.

The yield on a gilt is the rate of interest that is paid. Before the financial crisis, a 10-year gilt was paying 4.5% interest. Shortly after the financial crisis, it would have paid 3%. The yield rate then fell to 2% and fell once again to 0.5% after the EU referendum. Today (13th September) the 10-year gilt yield is 1.49%.

Mortgage rates have fallen

In the autumn of 2008, standard variable rates on mortgages were between 6.3% and 7.5%. Many were around 6.5 – 6.9%. Currently, standard variable rates are around 5 – 6%.

DISCLOSURE: Hargreaves Lansdown provided most of these figures, using data from a range of sources, including the ONS, Bank of England and Thomson Reuters. I sourced the data on today’s gilt yields and the mortgage rates.

Related articles:

What is your lender’s standard variable rate?

What is a stock market or stock exchange 

What is the FTSE 100 index 

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