Interst Rates Down again by 1%

LGG_2

same position as everyone else. having to open up accounts wit ha dire rate of intrest cause of the icesave mess.

one question though. something i dont really get. pp talk about having to live of their intrest. yet how do you do that because for eg family members have around 30K in savings yet only earn say £1500 a year in intrest. so if ppl are actually living off their intrest they must have a hell of alot of savings. in which case how can they complain? am i missing something?

maplewood2

LGG wrote: »

so if ppl are actually living off their intrest they must have a hell of alot of savings. in which case how can they complain? am i missing something?

yes you are - you cant spend youre savings as then you will lose your capital and have even less to live off - are you suggesting that people who have worked hard to save, and then try and live off their savings (and get taxed TWICE) should just spend it all on foreign holidays, expensive 4x4's and hairdos, and take out £400,000 mortgages?

Well yes i can see your point, if they did that theyd get bailed out by the rest of the taxpayers, so lets all do it.:rotfl:

tuggy12

LGG wrote: »

one question though. something i dont really get. pp talk about having to live of their intrest. yet how do you do that because for eg family members have around 30K in savings yet only earn say £1500 a year in intrest. so if ppl are actually living off their intrest they must have a hell of alot of savings. in which case how can they complain? am i missing something?

By "living of the interest" I'm sure people mean supplementing their other income, e.g. pension payments, to give a decent standard of living.

To live entirely off investment income alone would certainly require a big "wedge" in the bank.

At 2% p.a. you'd need £500k to give a couple the £10k p.a. this Gov't has decided is the minimum necessary to live on.

gozomark

I don't understand the fixation of many people in only spending interest income and not capital - would you really feel better off with inflation at 100% and interest rates at 90% than inflation at 0% and interest rates at 2% ?

If maintaining capital is important, logically its the real value not the nominal value that needs to be maintained

LGG_2

tuggy12 wrote: »

By "living of the interest" I'm sure people mean supplementing their other income, e.g. pension payments, to give a decent standard of living.

To live entirely off investment income alone would certainly require a big "wedge" in the bank.

At 2% p.a. you'd need £500k to give a couple the £10k p.a. this Gov't has decided is the minimum necessary to live on.

yeah i presume its more of a case of supplementing. even then you will need to have a big wedge of savings for it to make a big amount of difference.

yes you are - you cant spend youre savings as then you will lose your capital and have even less to live off - are you suggesting that people who have worked hard to save, and then try and live off their savings (and get taxed TWICE) should just spend it all on foreign holidays, expensive 4x4's and hairdos, and take out £400,000 mortgages?

no what im saying is if u soley live off your intrest you must have a huge amount of savings like the other person said above. so you can hardly cry poverty if you have 100's of K sat in savings but because u dont want to spend any of it or u want to leave it to you kids you act as if you have nothing. but like the above poster said its prob more of a case of supplementing other income.as to live just off intrest you wil lprob need to win the lotto. after all if u have 100's of K in savings at retirement age you prob have a nice public pension aswell.

tuggy12

This is how I see the big picture.

Cutting interest rates affects two groups:

1) Private individuals. Split into Savers or Borrowers

2) Companies.

Within group 1)

Reducing the interest rate simply moves cash from one group to another, no extra cash is made available.

What is certain is that savers will immediately have less to spend.

What is not certain is when borrowers will benefit from an increase in their wealth and when they do, will they spend it or use it to reduce debt.
My understanding is that approximately half of all mortgages are at fixed rates for various terms, so no quick benefit there.
Personal loans are normally done at fixed interest rates again for a fixed term. So people with current loans will not benefit.
Overdraft interest should be reduced fairly quickly but are individuals with overdrafts likely to spend the interest saved or just simply use it to reduce their overdraft.?



Within Group 2

Companies should certainly benefit from reduced rates, with all the usual advantages, ultimately producing more jobs.
But this isn't happening, The banks are not lending more money, they are lending less and are crippling many businesses.
Lending criteria have been tightened up all round and I can't see how a lower interest rate will change this.


Drastically reducing interest rates didn't work in Japan and it will not work here either.

dobefan

I've never opened a fixed rate savings account until recently, and I'm kinda glad I did even though I missed the 7%'ers :mad: .

I'm now thinking that the 2 - 3 year fixed rate accounts could be extremely good value the way things are going. i don't really see things improving over night or even in the next 12 months :eek: I'm off to have a look at the rates, if anyone would care to start a thread on the best deals for 2 - 3 year fixed rate funds I'd sure appreciate the posts.

Cheers

talana

nilrem wrote: »

I reckon you ought to join the real world TBH! :eek:

Perhaps you think pensioners who are finding things difficult should start taking in washing as well?:D

Pensioners weren't who we were talking about. I believe it was someone who was 50-ish, owned his house outright, no debts, all his income came from interest on savings, who was now complaining that his income was going down.

Well excuse me if I don't have too much sympathy. You talk about the real world..... well in the real world you have to do whatever it takes to generate enough income to live on, whether you like it or not. Suck it up!
For most of us that means getting a job of some kind, but as I said there are other options. Sure, not all will be appropriate to everyone but don't tell me these people can't do something.

LGG_2

Pensioners weren't who we were talking about. I believe it was someone who was 50-ish, owned his house outright, no debts, all his income came from interest on savings, who was now complaining that his income was going down.

if they are 50 ish and retired they are probably living off a nice public pension anyway while the rest drop dead as soon as they retire.thats if they can ever retire.and if they are living just off their intrest then as said above they prob have 100's of k stashed away. why would anyone have sympathy for that. go spend some of it.

TattyBear

I got my Icesace ISA back on Monday. There's no point in saving at the moment, so might as well spend a bit of it.