Wages are climbing FASTER than inflation - and my bank manager just texted me about what this actually means

By HOAR Team 15 April, 2025 5 mins read 79 Views

Okay, so I was scrolling through the latest economic data this morning (yes, I'm that person) while spilling coffee all over my keyboard. Typical Tuesday. The numbers actually surprised me - and I don't surprise easily after covering economics for 8+ years.

UK wages are STILL outpacing inflation.

Regular earnings dipped slightly to 5.6% for the three months to February, but here's the kicker - after accounting for inflation, that's still 2.8% higher in real terms. Translation: your money is actually buying more stuff than it did last year. When was the last time THAT happened?

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Why my mortgage broker is suddenly returning my calls

The Bank of England watches these wage figures like my neighbor watches my parking spot. These numbers heavily influence when they'll finally cut those painfully high interest rates.

Last month, they kept the base rate frozen at 4.5%. My mortgage broker (who ghosted me back in January when I needed help) suddenly texted yesterday: "Rates might move soon. Call me?" Amazing how they appear when they smell a commission.

This matters because lenders use teh base rate to determine what interest they'll charge on your mortgage or pay on your savings. My fixed rate expires in August and I've been losing sleep over it since 2023.

Wednesday's inflation announcement might change EVERYTHING

The ONS is dropping March's inflation figures tomorrow. February's numbers showed inflation falling - partly thanks to women's clothing prices dropping (my wife would disagree, but that's what the data says).

Still sitting above the Bank's 2% target though.

For anyone who slept through economics class... inflation measures how much everyday stuff costs compared to a year ago. Your groceries, haircuts, train tickets to visit your in-laws in Birmingham (which, honestly, should be cheaper considering the destination).

Meanwhile, unemployment is holding steady at 4.4%. Not terrible by historical standards.

What this mess means for your bank account

Higher wages than inflation is basically the economic holy grail. It means your paycheck stretches further at Tesco. I've noticed it myself - spent £120 last weekend on groceries that would've cost me closer to £140 this time last year.

Most of that extra cash flows back into businesses, which is good for everyone except maybe your savings account.

But... and there's always a but with economics...

The Bank of England has repeatedly pointed at rising wages as the villain keeping inflation elevated. My former economics professor would call this "the wage-price spiral" while dramatically waving his arms. Poor guy was always so excited about concepts nobody else cared about.

I had lunch with an investment banker friend last week who bet me £50 that we'll see a rate cut by June. "The data supports it," he said, while ordering his third £14 cocktail. Easy to be optimistic when you work in finance, mate.

So when will your mortgage payment finally drop?

Look, I'm not a fortune teller. If I were, I wouldn't have invested in that cryptocurrency my cousin recommended in 2018 (still down 94%).

But these wage figures, combined with tomorrow's inflation data, could finally convince the Bank to cut rates at their next meeting.

Or not.

The economic signals are mixed, and central bankers are notoriously cautious. They're like that friend who takes 20 minutes to decide what to order at a restaurant, then gets the same thing they always get.

What I do know is that for the first time in what feels like forever, your paycheck is actually growing faster than your expenses. And in this economy? I'll take any win I can get.

Frequently Asked Questions

What are the different types of money?

The main types of money include commodity money, which is based on physical goods like gold or silver; fiat money, which is government-issued currency not backed by a physical commodity; and digital currency, which exists electronically and is often decentralized, such as cryptocurrencies.

What is a budget deficit?

A budget deficit occurs when a government's expenditures exceed its revenues over a specific period, usually a fiscal year. This can lead to increased borrowing and national debt if not addressed through spending cuts or revenue increases.

What are the main functions of money?

The primary functions of money are as a medium of exchange, facilitating trade; a unit of account, which provides a standard measure of value; a store of value, allowing individuals to save and transfer purchasing power over time; and a standard of deferred payment, enabling credit transactions.

How can I budget my money effectively?

To budget effectively, start by tracking your income and expenses to understand your spending habits. Set realistic financial goals, categorize your expenses, and allocate funds accordingly. Regularly review and adjust your budget to ensure it reflects your current financial situation and objectives.

What is the role of central banks in the economy?

Central banks manage a nation's currency, money supply, and interest rates. They implement monetary policy to control inflation, stabilize the currency, and foster economic growth. They also serve as lenders of last resort to the banking system during financial crises.

What is the definition of money?

Money is a medium of exchange that facilitates transactions for goods and services. It serves as a unit of account, a store of value, and a standard of deferred payment, allowing individuals to compare the value of diverse products and services.

What is the difference between saving and investing?

Saving typically involves setting aside money in a secure account for short-term needs or emergencies, while investing involves using money to purchase assets like stocks or real estate with the expectation of generating a return over the long term. Investing carries higher risks but offers the potential for greater rewards.

Statistics

A survey by the American Psychological Association found that 72% of Americans reported feeling stressed about money at some point in the past month.
According to a Gallup poll, 56% of Americans report that their financial situation is better than it was a year ago.
According to the World Bank, around 1.7 billion adults worldwide remain unbanked, lacking access to basic financial services.
The average cost of raising a child in the U.S. is estimated to be around $233,610, according to the U.S. Department of Agriculture.
According to a survey by the Financial Industry Regulatory Authority (FINRA), about 66% of Americans could not correctly answer four basic financial literacy questions.
In 2020, the average retirement savings for Americans aged 60 to 69 was approximately $195,000, according to Fidelity.
According to the Federal Reserve, approximately 39% of Americans do not have enough savings to cover a $400 emergency expense.
As of 2021, the average American household had approximately $8,400 in credit card debt, according to Experian.

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How To

How To Develop a Good Saving Habit

Developing a good saving habit begins with setting clear financial goals. Determine what you are saving for, whether it’s an emergency fund, a vacation, or retirement. Start by automating your savings; set up a direct deposit from your paycheck into a savings account. Aim to save at least 20% of your income, gradually increasing this amount as you become comfortable. Track your spending to identify areas where you can cut back and redirect those funds to your savings. Regularly review your savings progress and adjust your contributions as necessary to stay motivated and achieve your goals.