The Do Nothing Club

magicdogsbrain

With savings and mortgage rates dropping there is a clamber to get on the bandwagon of fixed rate bonds.

The consensus is that interest rates are heading down and they will continue to be low for a considerable period.

The trouble with this is that now nothing will surprise me. How many times have you heard that some event would be unlikely and then it happens?

My current position is that I have an offset mortgage that is BASE + 0.44 and I have a large amount that is offset. I have considered moving some of the offset into a fixed rate bond – I have the BM 1 year bond at 6.6% ready to sign in my drawer.

Just as I was about to send off a cheque to BM I heard about the possible run on the pound. The last time there was a run on the pound was when we came out of the ERM. Then, interest rates were raised to 15%. If that happened and I had this BM bond – I would suffer.

I think the time has come to admit that I don’t know what to do for the best. I genuinely think that the best thing to do for most people at the moment is absolutely nothing.

I am now going into hibernation – see you later when this madness has ended.

militantconsumer

When my 4.39% fixed rate mortgage ended in July this year, all the mortgage rates were going up, and everyone was worried about inflation causing interest rate rises, so I fixed my mortgage at 5.99% until October 2011 (with a rip-off arrangement fee of £1,000 to stay with the same provider). Now interest rates have fallen to 3%.

In fact, in today's Times Money section it mentions that the base rate is likely to fall to as low as 2% next year. But on the front page of the same newspaper there is a story about a run on the pound that will lead to interest rate rises!

So far my money saving activites have led me to saving with Kaupthing Edge and moving my ISAs to Icesave. I got the Kaupthing money back but I'm still waiting for Icesave. Guess why? Because I changed banks to the market-leading Alliance & Leicester current account, and now I can't move the Icesave money to my old closed Co-op account! So even if there were still any decent fixed rate ISA deals available I will be too late to take advantage as my money is sitting in banking limbo for another month.

I think I'm going to miss out on some of my uswitch cashback for changing utilities companies, again because I changed bank accounts. And of course I fixed my gas and electricity prices because I thought energy prices were going to keep going up....

The amount of time I have spent trying to follow all these money saving strategies, perhaps I would have been better off if I'd just got myself a part-time job at Tesco instead....

So, in summary, magicdogsbrain may have a point!

Rant over.

cos69

There has already been a run on the pound - its down about 20% on the euro and 25% against the $ over the last 12 months.

If the economy were being managed sensibly then current interest rates would be higher and taxes lower. However the economy is being managed in the interests of the incumbent government achieving an election victory next May - shortly after the budget. So anything that happens after that is irrelevant to them.

drsue_2

militantconsumer wrote: »

When my 4.39% fixed rate mortgage ended in July this year, all the mortgage rates were going up, and everyone was worried about inflation causing interest rate rises, so I fixed my mortgage at 5.99% until October 2011 (with a rip-off arrangement fee of £1,000 to stay with the same provider). Now interest rates have fallen to 3%.

In fact, in today's Times Money section it mentions that the base rate is likely to fall to as low as 2% next year. But on the front page of the same newspaper there is a story about a run on the pound that will lead to interest rate rises!

So far my money saving activites have led me to saving with Kaupthing Edge and moving my ISAs to Icesave. I got the Kaupthing money back but I'm still waiting for Icesave. Guess why? Because I changed banks to the market-leading Alliance & Leicester current account, and now I can't move the Icesave money to my old closed Co-op account! So even if there were still any decent fixed rate ISA deals available I will be too late to take advantage as my money is sitting in banking limbo for another month.

I think I'm going to miss out on some of my uswitch cashback for changing utilities companies, again because I changed bank accounts. And of course I fixed my gas and electricity prices because I thought energy prices were going to keep going up....

The amount of time I have spent trying to follow all these money saving strategies, perhaps I would have been better off if I'd just got myself a part-time job at Tesco instead....

So, in summary, magicdogsbrain may have a point!

Rant over.

Speak to the Halifax this weekend about their fixed rate ISA. Their rate is about 5.45-5.75 depending on the number of years/amount. They will guarantee the rate as of the date you apply over the phone . You just have to get your ICESAVE funds to them in 60days.. Their rates will go down on Monday 17th.

militantconsumer

With the greatest of respect to people's strongly held political views, please can we avoid turning another interesting thread into a pointless party political argument about the government's handling of the economic crisis and their associated motives?

I think the 25% fall in the £ against the $ (from 2.0 to 1.5ish) has taken place in a much shorter period of time than 12 months.

But presumably a "run on the pound" is something worse than this - a kind of self-fulfilling prophecy as lack of confidence snowballs and panic-selling actually causes the value of the £ to fall further.

Oblivion

cos69 wrote: »

However the economy is being managed in the interests of the incumbent government achieving an election victory next May - shortly after the budget. So anything that happens after that is irrelevant to them.

That's not a given. The government doesn't have to go to the polls until May 2010.

Dave.

Swipe

If interest rates were raised to protect the pound what would that do to the upcoming deflation the BOE is predicting? I have locked some of my money away for 6 months but I'm going to keep the rest accessible as I'm hoping to buy a house from an auction over coming months if I see something at the right price.

opinions4u

magicdogsbrain wrote: »

Just as I was about to send off a cheque to BM I heard about the possible run on the pound. The last time there was a run on the pound was when we came out of the ERM. Then, interest rates were raised to 15%. If that happened and I had this BM bond – I would suffer.

If I recall correctly, interest rates hit 15% for about 2 hours.

And then dropped 3% in one go.

The ever reliable Wiki reads

"The Treasury took the decision to defend Sterling's position, believing that to devalue would be to promote inflation. [5] On 16 September the British government announced a rise in the base interest rate from an already high 10 to 12 percent in order to tempt speculators to buy pounds. Despite this and a promise later the same day to raise base rates again to 15 percent, dealers kept selling pounds, convinced that the government would not stick with its promise. By 19:00 that evening, Norman Lamont, then Chancellor, announced Britain would leave the ERM and rates would remain at the new level of 12 percent. It was later revealed that the decision to withdraw had been agreed at an emergency meeting during the day between Norman Lamont, Prime Minister John Major, Foreign Secretary Douglas Hurd, President of the Board of Trade Michael Heseltine and Home Secretary Kenneth Clarke (the latter three all being strong pro-Europeans as well as senior Cabinet Ministers), and that the interest rate hike to 15 percent had only been a temporary measure to prevent a rout in the pound that afternoon."

gunnaknow

That's from wiki's article on Black Wednesday isn't it? Here's the whole piece below.

http://en.wikipedia.org/wiki/Black_Wednesday

gunnaknow

magicdogsbrain wrote: »

With savings and mortgage rates dropping there is a clamber to get on the bandwagon of fixed rate bonds.

The consensus is that interest rates are heading down and they will continue to be low for a considerable period.

The trouble with this is that now nothing will surprise me. How many times have you heard that some event would be unlikely and then it happens?

My current position is that I have an offset mortgage that is BASE + 0.44 and I have a large amount that is offset. I have considered moving some of the offset into a fixed rate bond – I have the BM 1 year bond at 6.6% ready to sign in my drawer.

Just as I was about to send off a cheque to BM I heard about the possible run on the pound. The last time there was a run on the pound was when we came out of the ERM. Then, interest rates were raised to 15%. If that happened and I had this BM bond – I would suffer.

Magicdogsbrain, if you want to play things safe then maybe you should look at the Bank of Scotland's instant access savings account. It guarantees a rate of 5.8% for a year, yet you can make 4 withdrawals penalty free. Handy if interest rates rise and you wish to reinvest elsewhere. Not only this but it also allows you to make unlimited deposits, so you can dump cash into there at a later date. Handy if interest rates crash and you have unprotected funds elsewhere.

I opened this account by phone and then paid in the minimum £5000 at a branch 2 days later. Quick or what? I might never need to put any more into it if interest rates rise but atleast I now have a safe haven to dump 50K at a later date, if interest rates plummet. I'll also be able to sleep at night, knowing that I can get access to it, penalty free.

http://www.bankofscotlandhalifax.co.uk/savings/BOSinstantaccesssavingsaccountreward.asp?source=NETGOOGLSAVESA310002

amcluesent

So dropping rates to 3% or less is politically necessary to limit the worst of the depression, closures, redundancies and repos. Some exporters will benefit.

But, as soon as other economies recover, oil etc. will rise again and inflation will be rising in the UK. That's when interest rates will be going up, and taxes to pay off pension thief Clown's truly gargantuan public sector borrowing.

IMHO, try to get a fixed rate mortgage before the next election and release all your saving from bonds in readiness for interest rates to be whacked up by the incoming government (of whichever party).