Bond funds drop. Long-duration stocks drop. Real estate drops via cap-rate compression. Your fixed-rate mortgage gets cheaper in real terms. Net effect on your wealth: the number.
Each line takes a balance plus an interest-rate sensitivity (duration in years).
Fixed-rate mortgage duration is approximated as half the remaining term.
Positive duration: rising rates reduce net worth, falling rates lift it.
| Scenario | Impact | % of equity |
|---|---|---|
| Rates +1% | −£75,500 | -9.4% |
| Rates +2% | −£151,000 | -18.9% |
| Rates +3% | −£226,500 | -28.3% |
| Rates -1% | +£75,500 | +9.4% |
| Rates -2% | +£151,000 | +18.9% |
Illustrative figures only. Duration is a first-order approximation; for rate moves above three per cent, convexity matters. For your specific situation, consult a qualified adviser.
Worth carries the duration-of-equity calculation into the household balance sheet and surfaces the levers when conditions shift. Lock in, shorten, hedge, or accept the bet. Join the waitlist.
Because the rate is locked in. If new mortgages cost two per cent more, yours is the bargain. In economic terms, the present value of your future payments dropped: you are paying back in cheaper future money. That is a win for the borrower. It does not show up in your bank account, but it is real.
Because they kind of are. A stock's price equals future cash flows discounted to today. Raise the discount rate and the price drops. The effect is biggest for growth stocks whose value is mostly in distant cash flows. 2022 was a textbook example: long-duration tech stocks dropped a third or more as rates rose, while short-duration energy stocks rose.
Directionally accurate, not surgically precise. Duration is a first-order approximation. For large rate moves (above three per cent), second-order effects (convexity) matter. For typical one-to-two-per-cent moves it is reliable to within ten to twenty per cent. Use it to see which direction you are exposed, not to predict the exact amount.
If net duration is high positive, rising rates hurt you. Mitigations: lock in fixed-rate debt now, hold shorter-duration bond funds, consider some inflation-protected securities, accept that long-duration stocks are a bet on rates falling. If net duration is negative (rare for retail), you benefit from rate rises.