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Anyone withdrawing savings due to 1% base rate?

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  • thelawnet
    thelawnet Posts: 2,584 Forumite
    Part of the Furniture 1,000 Posts Name Dropper Combo Breaker
    uk_messer wrote: »
    Brown got praise from the Tory press for having given the Bank of England power to set the rate. Now suddenly he's a villain who didn't do enough to prevent the current situation. I'd like to know how the Tories would have done any different. They're normally all for cutting red tape and leaving everything to the wind so they and their cohorts can shut the hell up.

    Every time I've looked at a headline for the last x years it's Tory papers (esp the Evening Standard in London) that have had headlines claiming doom and gloom at any opportunity they could. Simply because they have allegiance to a party which isn't in power. They claimed house prices were crashing for the last 7 years

    Tory papers?

    The Sun endorsed Labour in 1997, 2001 and 2005, so did the News of the World, The Guardian, The Daily Mirror, Daily Star. The Evening Standard endorsed Labour in 1997 and 2001 at least, probably 2005 as well.

    And as for house prices crashing? The actual Tory-supporting papers, i.e. The Daily Mail and Daily Express had daily headlines saying things like 'house prices up £30 per day last month' and similar. Not sure what newspapers you've been reading.
  • julieq
    julieq Posts: 2,603 Forumite
    It would seem to me a very very bad idea to overpay a mortgage with savings cash - why would any rational person go from a safe investment with a 2% annual return return to a completely illiquid investment falling 2% per month at a time when they are more likely to lose their job and need cash than at any other time in their lifetime?

    As to taking calls from Florida based precious metals brokers as one poster was, the words boiler, room, and scam come to mind.

    As other people are considering taking money from banks and investing it in equities, you'd say low interest rates are doing what they're supposed to, i.e. encouraging the flow of stagnant capital off the banks' balance sheets back into the economy.
  • gozomark
    gozomark Posts: 2,069 Forumite
    julieq wrote: »
    It would seem to me a very very bad idea to overpay a mortgage with savings cash - why would any rational person go from a safe investment with a 2% annual return return to a completely illiquid investment falling 2% per month at a time when they are more likely to lose their job and need cash than at any other time in their lifetime?.

    paying off your mortgage doesn't mean you are investing in property, as you already own it - all you are doing is paying down debt
  • [Deleted User]
    [Deleted User] Posts: 12,492 Forumite
    10,000 Posts Combo Breaker
    you don`t own a property if you have a mortgage. Paying off a mortgage is investing in property as it eventually becomes your own and that, psychologically, is beyond price
  • gozomark
    gozomark Posts: 2,069 Forumite
    the debt doesn't fall if the property falls in value - paying off a mortgage is paying off a debt, not investing in property - you have a big asset and a big (but hopefully not as big) liability - you own the property from day 1, but its assigned against the debt
  • I could suggest.. withdrawing money from Bank savings accounts and putting in NS&I index linked certs. This has a couple of plus points...

    1. It shows as outflows from poor paying Bank savings accounts.
    2. You are not contributing directly to paying bank employee bonuses.
    3. If inflation takes off... which I expect it might .. then you get some protection.

    Finally, it is a safe course of action .. in terms of protecting your capital ... in sterling terms at least.

    Deag
  • Linton
    Linton Posts: 18,349 Forumite
    Part of the Furniture 10,000 Posts Name Dropper Hung up my suit!
    Brown a good chancellor - you're living in la-la land. Obviously taken in by the spin meisters.

    I always thought that the guy was out of his depth. The only thing in 10 or so years I originally gave him credit for was BoE independance but even thats come back to bite him on the ****.

    Tell me, what has GB done to give people the impression that he was any good????

    Only presided over the longest period of continuous growth this country has ever seen. People now are richer than they have ever been; the level of grinding poverty is the least it has ever been; the standard and availability of education and health care is the best it has ever been etc etc.

    I guess the problem is that no-one younger than say their mid thirties has ever directly experienced anything different.
  • julieq
    julieq Posts: 2,603 Forumite
    Of course it's investing. You can either pay down your mortgage with your money or save or invest. You can put a value on either type of investment.

    So if you have two places to put your money, one falling in value and one not, then why would you chose the former? It's completely irrational. If you need the cash, which isn't unlikely in the current climate, you can't get it without selling the house, in which case you lock in a loss, whereas even at 1% rates with a cash saving you can access it easily. Unless you can remove the entire debt, you're arguably in more danger of losing your home transforming savings into bricks and mortar as you reduce your ability to cope with long term problems such as illness and unemployment.

    Whoever it was said that this was a psychological step hit the nail on the head really. In fact there's a lot of psychology on this thread, it's largely about people worrying and trying to find a way of controlling an uncontrollable situation. And also that the ground has shifted so that having savings doesn't get you much, there's the feeling of being punished for having done the right thing while those who haven't are paying far less for their debt. There's enough psychology here for a whole conference, to paraphrase Fawlty Towers.

    The fact is that the banks have more important things to worry about than a few disgruntled savers pulling their cash. Ask yourself where it gets you. If you are up as a result, do it, if not, don't. Don't do it to prove a point to someone who doesn't care either way, that's futile.

    I'd be very wary personally of following obvious paths into gold (for example) where there is a possible bubble forming - you could easily have done the same thing into oil last year. I don't particularly want to be lending to the government via NS&I because I get to pay for that debt later. If I had spare cash at the moment I'd be taking a very contrarian view and going for guaranteed equity bonds, because at these interest rates the downside risk is low (lost interest), and there's a lot of potential upside over 5 years. GEB's have been rightly dismissed in recent years, but it's time to look again.

    Actually my spare cash is offsetting my mortgage, which is a base rate tracker (+0.89%) taken out in October last year. It's with a bank (HBOS), and I don't care that it's with a bank because it makes me the best return and gives me access to my cash if I need it.
  • sh856531
    sh856531 Posts: 452 Forumite
    Part of the Furniture 100 Posts Name Dropper Combo Breaker
    Sorry S, I'm going to have to rubbish that.

    It’s a bit like saying the Chef has nothing to do with the meal your eating because the waiter brought you it.

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

    Hi United...,

    Can you be more specific? Where on that page does it say the current government sets interest rates?

    From the first paragraph:
    The Bank's Monetary Policy Committee has been given devolved responsibility (sometimes called independence) for managing the monetary policy of the country. The Treasury has reserve powers to give orders to the committee "if they are required in the public interest and by extreme economic circumstances" but such orders must be endorsed by parliament within 28 days

    As far as I know, the government has never used their reserve powers to force the MPC to change an interest rate decision. The last sentence in particular is also instructive as it tells us that even in "extreme economic circumstances", the MPC reports to parliament not government (e.g Brown, Darling et al)

    Have I perhaps missed something?

    Best Regards

    S
  • Linton
    Linton Posts: 18,349 Forumite
    Part of the Furniture 10,000 Posts Name Dropper Hung up my suit!
    Even if it means freezing or even losing some savings, if the Bank Of England dont increase the base rate again at the next announcement Im withdrawing my savings from the banking system. Independant of savings it was something I had already been considering, after being sickened without say in the whole fiasco.

    To go back to the original posting....
    The answer, as always, is to have a sensible diversity of savings/investments, and to think long term. You should not put yourself in a position where you are dependent on one form of investment.

    You do need some money in an easily realisable form and that is best in a bank/building society where it is guaranteed safe - rather safer than under the mattress or enticing deals from US cold-callers. Any interest is an added bonus. Mid-term funds can be held in fixed rate vehicles - term accounts, bonds, Gilts etc.

    Other funds which you dont need in the near future can be in equity - shares or unit trusts.

    As other people have said you can also pay off your debts. In a few years time when rates go much higher you will be priding yourself on your financial acumen.

    It's too easy to blame other people (governments, bankers etc) when the responsibility is actually yours. The tools are there. If you were concerned about cash interest rates you could have locked into1 year to 5 year fixed rate accounts paying around 6% just a few months ago. From your posting I guess you didnt - your fault.
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