Rating agency Moody’s highly-anticipated decision to strip the UK of its prized AAA credit rating on Friday evening has sent commentators into a frenzy. 

The UK, which was downgraded on fears over rising government debt and years of slow economic growth ahead, now follows the footsteps of the US and France, which lost their AAA ratings in 2011 and 2012.

Experts have spent the weekend castigating the Coalition government, blaming the downgrade on the shape of Chancellor George Osborne’s austerity plans.

But what, if anything, does Friday’s announcement mean for the consumer?

Currency

“It might be worth getting in your summer holiday foreign currency now,” according to Tom Stevenson, investment director at global fund managers Fidelity Worldwide Investment.

The pound slid to a 17-month low this morning, having fallen to a two-year low against the dollar on Friday evening after the downgrade announcement.

Stevenson said the reasons for the downgrade – persistently low growth and the reduced ability to deal with any future economic shocks – are likely to weigh on the pound.

“It fell by a cent against the dollar on the news and is likely to fall further.”

However, pressure on the pound is likely to be short-lived.

“When the US lost its AAA, its cost of borrowing actually fell as investors continued to see it as a safe haven,” Stevenson said.

If borrowing costs stabilise it is unlikely the pound will go lower and it will more than likely rebound.

For that reason, you could get a better deal if you buy your holiday money now.

Stock markets

Stock market investors appear to have shrugged off the downgrade, with the FTSE 100 climbing back near to multi-year highs in early trading this morning.

At one point, the blue-chip index was at 6,379 points, up 0.7% or 44 points.

Adrian Lowcock, senior investment manager at Hargreaves Lansdown, says the current environment creates opportunities for savvy investors.

“The loss of the UK’s triple AAA credit rating should come as no surprise to investors and indeed the market’s initial reaction suggests it was to be expected.

“To investors the loss of the credit rating in itself will not have significant impact, however a weaker currency might. The FTSE 100 is largely made up of multinationals; indeed around two-thirds of earnings are from overseas. If a downgrade does contribute to a weaker pound, this will boost profits from operations whose profits are generated in foreign currencies.

“In this environment, there will be companies which are able to take advantage and those which do not. We have seen that British companies have been able to grow their businesses even though the wider economy remains sluggish. Fund managers with excellent stock picking skills are able to identify those companies which can outperform.”

Mortgages

Ben Thompson, managing director of the Legal & General Mortgage Club, believes the downgrade will have little effect on the availability of funding.

“This downgrade – while embarrassing and untimely – will not have come as a shock. Markets will have expected this to a certain degree and there should not be much disruption to the cost of funding. Moreover, the Funding for Lending scheme and other measures implemented have ensured that cheap funds are at the ready, so mortgage pricing should continue to remain low.

“In fact, if anything, competition among lenders to attract certain borrowers will increase, so we expect to see further record lows such as the five year fixed rate just announced by the Yorkshire Building Society.”

Households

Consumers have already been warned to brace themselves for higher energy prices this year and the downgrade will do little to help the situation.

While a weaker currency is good for economic growth as it will make UK exports cheaper and the country more competitive, it could mean higher inflation.

Lowcock says: “It could drive up inflation as the costs of imported goods such as energy and food rise. Households are likely to feel the squeeze in the short term.”

Verdict

The overall verdict is the fallout of the downgrade will be felt in Westminster rather than the City.

Ed Balls, Labour’s Shadow Chancellor, said: “This credit rating downgrade is a humiliating blow to a Prime Minister and Chancellor who said keeping our AAA rating was the test of their economic and political credibility.”

With less than a month to go until the 2013 Budget, all eyes will be on George Osborne to see if he can respond to the underlying motives behind Moody’s decision or whether his credibility will be shot to pieces for good.