City thinking, local knowledge

How Does a UK Recession Impact Your Finances?

By Questa Chartered

The UK, as per the latest reports, has officially entered a recession. This isn’t just a statistic; it’s a significant event that directly impacts your daily life, especially when it comes to your finances.

Gross Domestic Product (GDP) fell by 0.3% in the final quarter of 2023, marking the second consecutive quarter of negative growth. Let’s take a look at how the UK recession could impact your finances.

UK Recession: What It Really Means

A recession isn’t just a term economists throw around; it’s a reality that affects everything from job security to how much you spend in shops. The immediate impact might not be stark, but the long-term effects can alter the financial landscape.

With inflation at 4% and wage growth at 6%, there’s a deceptive feeling of financial stability. However, a recession often leads to tighter credit conditions and can dampen future job prospects and wage increases.

The Impact on Savings

Interestingly, the recession’s cloud has a silver lining for savers. Despite the economic downturn, savings rates are notably higher than in recent years. The best easy-access savings deal currently offers 5.15% interest, and the best fixed-rate deal is at 5.21%.

However, with the possibility of the Bank of England reducing the base rate, savers should contemplate fixed-rate savings accounts to secure these rates for a longer period.

Mortgages in a UK Recession

Mortgage rates have been a rollercoaster ride, particularly for those whose fixed-rate deals are nearing an end. With the average two-year fix now at 5.68% and the five-year fix at 5.26%, it’s a significant jump from rates seen a few years ago. However, the recession could lead to a decrease in interest rates, potentially benefiting those looking to remortgage.

It’s crucial to stay ahead of the curve and consider your options before your current deal expires. Our Questa mortgage expert, Susanne Garrod, would be happy to discuss any mortgage uncertainties that may be causing you concern.

Investments and Pensions in Light of UK Recession

For investors and pension savers, a recession doesn’t necessarily spell doom. Market dynamics often factor in such economic shifts well in advance. What’s crucial is the present and future market performance rather than past data.

With the UK market making up less than 4% of the global stock market, the focus should be more on global, particularly US, economic conditions. Interestingly, UK stocks are currently seen as undervalued, presenting potential investment opportunities.

Key Takeaways and Actions

1. For Savers: Check if you’re getting the best return on your savings. Consider fixed-rate accounts to secure current high rates.

2. For Mortgage Holders: If your fixed-rate deal is ending, explore your options now. A recession might lead to lower rates but be prepared for any scenario.

3. For Investors: Focus on the broader global economy, especially the US market. Don’t let short-term economic fluctuations derail your long-term investment strategy.

4. General Advice: Stay informed and proactive. Economic conditions are constantly evolving, and your financial strategies should adapt accordingly.


In conclusion, a recession is a complex economic event with diverse impacts. While it poses challenges, it also opens up opportunities for savvy savers, mortgage holders, and investors.

The key is to stay informed, evaluate your options, and make decisions that align with your long-term financial goals. Remember, every economic phase is temporary, but the decisions you make today will shape your financial future.

Further reading

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