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

ebyard

Bazzeer wrote: »

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

Move it offshore. Plenty of solid banks who will do that for you. Just remember to pay your taxes

innovate

ebyard wrote: »

Just remember to pay your taxes

...and that you will have little or no protection for offshore money.

isofa

Agree with others, we have to rid ourselves of this credit lifestyle, people borrowing way beyond their means, putting everything on a credit card, switching to zero balance deals to put off the inevitable payments than one day may break them.

Dropping interest rates and encouraging people to borrow massive amounts will once again boost this cycle for a more catastrophic crash the next time. What an irresponsible attitude this government and a massive amount of the UK population have.

tweet

The point is exactly as you're stated: to make people stop hoarding cash, start spending and unfreeze the economy, either on the high street or in stocks and shares - that's where the real crisis is, not in savings.

mrposhman

tweet wrote: »

The point is exactly as you're stated: to make people stop hoarding cash, start spending and unfreeze the economy, either on the high street or in stocks and shares - that's where the real crisis is, not in savings.

This is my point entirely.

If others want to worsen any recession we enter in to out of sentiment then thats their decision but frankly thats not want the UK needs or wants.

The reduction in interest rates should be modelled on encouraging savers to spend rather than those in debt to borrow further. This model however will cause the banks to gain big profits quickly as they will lower rates for savers but keep them relatively high for borrowers. Maybe this could be a source of creating the compensation buffers for savers in the future??

The point I'm making is I no way condone returning back to the days of cheap and far too easily accessible credit but the facts remain that the way spending is going we are heading headfirst into a pretty deep recession, whatever the causes, they don't matter at the moment as we must take corrective action to reduce the impact that a major recession will have on the country.

I think the bank "bailout" had to be done but the government missed a trick in stating they want lending to go back to 2007 levels. Maybe in terms of volume but not in price, but it doesn't appear that this was stipulated.

StarRover

tweet wrote: »

The point is exactly as you're stated: to make people stop hoarding cash, start spending and unfreeze the economy, either on the high street or in stocks and shares - that's where the real crisis is, not in savings.

I totally agree, my squirreling money away for a rainy day is finished. When I'm eventually reunited with my IceSave ISA's it's a new car, 50" telly and lots of foreign holidays for me!

:rotfl:

SunnySusie

well one does traditionally spend ones way out of recession, hence low interest rates. This has to be balanced against inflation. With this running high it is hard to see rates being lowered all that quick but who knows. A few are predicting hyperinflation as a worst case which will indeed render saving pointless - but not because banks are "risky". Maybe it's time to go into property !

I don't know why anyone thinks British banks are risky though, who has lost money so far?

RayWolfe

isofa wrote: »

we have to rid ourselves of this credit lifestyle, people borrowing way beyond their means, putting everything on a credit card, switching to zero balance deals to put off the inevitable payments than one day may break them.

What an irresponsible attitude the UK population have.

Indeed! You have summed up almost the entire ethos of most of this board ... except this area, Savings & Investing.

RayWolfe

SunnySusie wrote: »

I don't know why anyone thinks British banks are risky though, who has lost money so far?

No one.

The_Dangerman

GeorgeHowell wrote: »

The talk of rates down to 1% is typical New Labour thinking. Firstly in their ageist, youth-obsessed world they are primarily concerned with the young, who are mostly in debt with large credit card balances, mortages etc. They overlook savers who tend to be older and who have most of the capital. And they overlook that trying to stimulate demand by giving the young more money will be offset by the older who won't have enough money to spend.

But their prime aim is to reduce the interest burden on government debt which had already spiralled out of control even before the banking crunch This is in large part because of Labour's obsession with "social justice", and their traditional inability to take on board any concept of sound public finance.

Hopefully they won't be in office long enough for such a low rate of interest to become a reality.

But how many people rely on the interest on savings fund their life? Much fewer than those with mortgages or jobs, both of whom will benefit from interest rate cuts.

If it's irresponsible for people to borrow and being reliant on interest rates going up and tipping them over the edge, then I don't see how the reverse isn't true. Nobody should rely on interest rates not going down.

If someone has such a high volume of saving that they can live of the interest, it would make far more sense for them to do something with it like buy a house as rental vehicle. Now would be a superb time with cash buyers having their arms snapped off!! They also wouldn't be at the mercy of mortgage rates, and I suspect the yield will exceed that of saving rates.