Interest rates could drop to 1% - what's the point of risking money in savings?

Bazzeer

http://www.telegraph.co.uk/finance/economics/interestrates/3211785/Financial-crisis-Interest-rates-to-hit-lowest-level-since-1694.html

Surely this would make savers withdraw all their money from the banking system and cause another financial catastrophe. If the interest rate dropped as low as 3% I think I would prefer the risk free "under the mattress" approach.

I just can't get my head round it, I'd of thought it made more sense in these turbulent times to increase interest rates

isofa

Risk free under the mattress?! What about fire, theft and all sorts of other risks - devaluation due to inflation, even if the interest rate is low and inflation higher, you are at least at not losing as much as if it's not gaining any interest at all.

If people start doing this, burglaries will rocket too.

Contents insurance will only cover a small amount of cash, so who's going to pay out when you have your life savings stolen?

funkyhitman

I would hope 'under the mattress' really means 'in a safe underground covered by a nice shagpile' .

Reaper

They are talking about BoE rates. That is not rates for savers. As long as banks are desperate for money and the LIBOR rate remains high I would expect savers to get a couple of percentage points above whatever the base rate is.

Anyway, best not to lose sleep over something that hasn't happened and may not. There's enough of that going on already.

Bazzeer

isofa wrote: »

Risk free under the mattress?! What about fire, theft and all sorts of other risks - devaluation due to inflation, even if the interest rate is low and inflation higher, you are at least at not losing as much as if it's not gaining any interest at all.

If people start doing this, burglaries will rocket too.

Contents insurance will only cover a small amount of cash, so who's going to pay out when you have your life savings stolen?

I didn't mean literally "under the mattress" but I think even that looks quite favourable when compared to leaving ones money in the "risky" banking system, especially if the bank is paying a paltry 1-2% interest

LongTermLurker

If the interest rates dropped to 1% then that would be enough incentive to invest rather than save. The potential reward differential would be well worth the added risk.

LongTermLurker

Bazzeer wrote: »

I didn't mean literally "under the mattress" but I think even that looks quite favourable when compared to leaving ones money in the "risky" banking system, especially if the bank is paying a paltry 1-2% interest

What's this about risky banks? Which individuals have lost money so far with sub-£50k savings? They may have temporarily lost access - solution? Spread it.

So long as you stick to the "rules", banks are still risk free until all governments have become bankrupt.

isofa

Bazzeer wrote: »

I didn't mean literally "under the mattress" but I think even that looks quite favourable when compared to leaving ones money in the "risky" banking system, especially if the bank is paying a paltry 1-2% interest

If you think it looks favourable, I'll just refer you back to my original reply.

As long as you are saving less the 50K with each organisation protected under the FSCS, where exactly is the risk of losing money?

Who's lost any money so far? Even in the serious collapsed of Icesave, it'll all be protected, even that over 50K. What about NR, B+B, HBOS - anyone lose any money so far?

There is no way in the world that even with a lower interest rate, that keeping money out of an account at home can, in any way, shape, or form, be described as a safe thing to do.

And you're always got investments if you fancy more risk as LTL mentions too.

captainkevos

isofa wrote: »

If you think it looks favourable, I'll just refer you back to my original reply.

As long as you are saving less the 50K with each organisation protected under the FSCS, where exactly is the risk of losing money?

Who's lost any money so far? Even in the serious collapsed of Icesave, it'll all be protected, even that over 50K. What about NR, B+B, HBOS - anyone lose any money so far?

There is no way in the world that even with a lower interest rate, that keeping money out of an account at home can, in any way, shape, or form, be described as a safe thing to do.

And you're always got investments if you fancy more risk as LTL mentions too.

And you'd need a shotgun to guard it as well ! Then you'd risk years in prison if the police find out !! Also, if you're in a say, 1,2 or 3 year fixed rate bond then you're interest rate is guaranteed regardless of the base rate cuts.

isofa

captainkevos wrote: »

And you'd need a shotgun to guard it as well ! Then you'd risk years in prison if the police find out !! Also, if you're in a say, 1,2 or 3 year fixed rate bond then you're interest rate is guaranteed regardless of the base rate cuts.

LOL quite! :rotfl:

LongTermLurker

captainkevos wrote: »

And you'd need a shotgun to guard it as well ! Then you'd risk years in prison if the police find out !! .

risk = getting caught.
reward = one (or more) less robbing b@st'rd(s) on the street and your 15 minutes of fame