In the UK, the term “yo-yo team” is used to describe a football club that is regularly promoted and relegated, “yo-yo-ing” up and down between divisions.

The 2023/24 Premier League season saw a trio of yo-yo teams relegated. Luton Town, Burnley and Sheffield United all suffered an immediate return to the Championship after securing promotion from the second tier in the 2022/23 season.

When it comes to your finances, interest rates are perhaps the closest cousin of yo-yo clubs, constantly moving up and down. At the moment, rates are higher than they have been for a while, but it is widely expected that the Bank of England (BoE) will bring them down soon.

To prepare for this possibility, read on to find out what falling interest rates could mean for your money as an athlete, and what actions you might want to take to make the most of the situation.

In recent years, the Bank of England increased interest rates to tackle inflation

Inflation is the rate at which the prices of everyday items increase. In the past few years, prices have risen quickly, with inflation hitting a 40-year high of 11% in autumn 2022. In response to this cost of living crisis, the Bank raised its base rate to try and bring inflation back under control, back to its annual target of 2%.

You may have read that inflation finally fell to the target rate of 2% in the 12 months to May 2024, reaching this goal for the first time in nearly two years.

So, now inflation is at the target level, many professionals expect the Bank to cut the base rate in the next few months. This is Money reports some forecasts predict the Bank to cut the base rate to 4.5% by the end of 2024. But what could this mean for your finances as an athlete?

With inflation under control, you may see saving rates fall

Over the past year or so, you may have enjoyed stronger returns on your cash savings.

According to Moneyfacts as of 12 July, several banks currently offer easy access savings accounts with interest rates of 5% and above, with the highest available rate sitting at 5.2%. However, in light of recent inflation news, this may change soon.

Following a rate cut, you could expect to see savings rates fall. This means cash sitting in your savings accounts will earn less, and you may want to consider other options.

Over the long run, investments could provide better average returns than cash. Indeed, the Times Money Mentor reports that the average annual return of the FTSE 100 was 7.3% over the past 30 years, assuming you reinvest dividends.

You would be hard-pressed to find a savings account with a better rate, and if the Bank does cut the base rate soon, savings rates will likely fall from where they are now.

Similarly, it is worth being aware of how certain assets and parts of the stock market could be affected. For example, many athletes choose to invest in technology and growth stocks, both of which could potentially benefit from a rate cut as they may be able to invest more in their products or services. In turn, these investments could increase in value.

Meanwhile, bonds tend to lose value when interest rates rise. So, it is crucial to assess whether you have the right balance of assets in your portfolio.

It is particularly important to pay attention to these aspects as an athlete, especially the impact that changing interest rates can have on your retirement accounts and long-term investment strategies.

As you will usually face a “first retirement” at the end of your sporting career, it is crucial to respond to changes like this and adapt your strategy so that you can be sure you will be financially secure when you finish competing in professional sport.

At ProSport, we can help you choose investments that match your interests and support your goals. We can use cashflow planning to forecast how your finances could respond to fluctuating interest rates, and help you prepare for your retirement from sport.

If interest rates fall, borrowing could become cheaper

As well as stocks, shares, and cash savings, property can be an effective way to build wealth for your future as an athlete. A portfolio of commercial or rental properties can provide a way to achieve strong capital gains on your wealth during your sporting career, or offer a stable source of income in retirement.

If you plan on starting or expanding a portfolio soon, it is important to be aware of how a base rate cut could affect you.

Despite having high wages, young players are likely to have low levels of capital. As a result, it is likely to be necessary for them to borrow through a mortgage to purchase a main residence or investment property.

If the Bank reduces the base rate, the cost of borrowing is likely to fall. So, you may be able to secure more competitive mortgage deals if you delay making any purchases until later in the year.

You may be able to borrow less across the term of the mortgage as a result. Or, with lower mortgage payments, your costs as a landlord could fall and you may be able to take more income from your property portfolio.

You may also be able to secure a better deal if you plan to take out a personal mortgage to move home or if your current mortgage deal is ending soon.

Before making any decisions, it could be important to speak to a mortgage broker or adviser. They will be able to help you navigate the mortgage market as it changes over the coming months.

Elsewhere, falling interest rates could mean the cost of financing luxury items like cars, boats and holiday properties could decrease. If you are considering this type of purchase, you may want to wait to see if better deals become available.

You may be able to secure better agreements with clubs and commercial partners

More broadly, there may be other considerations specific to you as an athlete that you might want to think about when interest rates fall.

For example, borrowing costs will likely fall for businesses and they may enjoy higher revenues if a base rate cut boosts consumer spending.

With lower costs and higher income, companies might increase their marketing budgets. So, when negotiating agreements and endorsements with commercial partners, you may be able to secure more lucrative deals.

Football clubs, leagues and other sporting organisations may also have more money to play with following a rate cut. So, salary caps may rise, and you could be able to negotiate a better wage structure when you start a new contract.

It is worth looking into your contracts and deals when interest rates fall, and seeing if you and your team can find these opportunities.

Get in touch

If you would like help managing your wealth for throughout your sporting career and beyond, get in touch.

Email enquiries@prosportwealth.co.uk or call 01204 602909 to find out how we can help.

Please note

This article is for general information only and does not constitute advice. The information is aimed at retail clients only.

The value of your investments (and any income from them) can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance.

Investments should be considered over the longer term and should fit in with your overall attitude to risk and financial circumstances.

Your home may be repossessed if you do not keep up repayments on a mortgage or other loans secured on it.

The Financial Conduct Authority does not regulate buy-to-let (pure) and commercial mortgages.