Anyone withdrawing savings due to 1% base rate?

sh856531

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.

It's not entirely irrational. If I had a mortage just now, I would almost certainly start trying to pay it down as quickly as possible. You will likely never have such an opportunity to wipe out your mortgage debt as quikly as people are getting now.

Now you could argue that the extra hundreds of pounds people are getting each month could be invested - maybe it would even get a better return than the reduction in interest you will pay on the mortgage. But who knows? Maybe you would get a better return - maybe you wouldn't.

Also to my mind, unless you are planning on moving or selling your home, the relative price of the property would seem to be irrelevant. Your property could lose 50% of its value for the next 100 years and it still wouldn't have any bearing on how much you have to pay your bank in interest payments. It only matters if you need to sell your property (as I understand it).

I take your point about liquidity, but everyone has to take a judgement on that based on their own circumstances. I doubt many people are going to take their 70K worth of savings and whack it all on the house. But taking the money that is now being saved each month due to lower interest rates and firing it at the mortgage seems to me to be a very smart move in the long run. Who knows what interest rates will be in a few years...

Best Regards

julieq

The argument about rates going up in a few years is misleading. Savings rates are generally comparable to mortgage rates, as one goes up so does the other. What's maybe different at the moment is that people locked themselves into higher rates on mortgages last year so there's a big differential just at the moment.

There's no effective difference between paying off a mortgage with cash or having a balancing investment, other than the liquidity issue. Obviously, there's certainly value in allocating cash against a mortgage so that a remortgage is possible on your own terms without worrying about valuations, and it certainly is a time to be harvesting savings on mortgage payments.

The point is in relation to the original post, which was about making an investment decision essentially as revenge on the evil fat cat bankers. That's a futile position to take and could be costly. I remember a lot of people angrily shutting down their stocks and shares ISAs in the early noughties because they hadn't performed as well as they had expected, doing that and never starting again caused them to miss the last mini-boom.

sh856531

The point is in relation to the original post, which was about making an investment decision essentially as revenge on the evil fat cat bankers. That's a futile position to take and could be costly.

Indeed. Many seem to have lost sight of the fact that if they pull their money out of the banks they will just collapse the bank and force the taxpayer to stump up even more money to plug the crazy sized hole.

I can see why people are very upset but pulling your money out does seem a little bit like cutting off your nose to spite your face.

Best Regards

S

quatro

Surely giving savers a better rate of interest will mean more people will have an income each month - and will be thus able to spend again. Without the monthly interest many rely on the only alternative is to not spend a thing, thereby not benefiting the economy.

sh856531

Surely giving savers a better rate of interest will mean more people will have an income each month - and will be thus able to spend again. Without the monthly interest many rely on the only alternative is to not spend a thing, thereby not benefiting the economy.

Thats quite true but if they put up interest rates the increased amount of money that people have to pay on their mortgages more than offsets any increased spending by savers. Its as simple as that really.

I could be totally wrong on this, but I would have thought that there are relatively few people who have all their investments sitting in a bank account as cash and are sitting there living off the interest. Of course I know there are a some people doing this, but that number must must be tiny in comparison to the number of people who have mortagages (which seems to be just about everyone over the age of 30 these days!).

As such the BoE has made a very simple calculation based on achieving the maximum impact with the limited tools at their disposal.

Its just a shame that it humps prudent people. But I guess we have people who think its ok to live way beyonds their means to thank for that.

S

Primrose

Thankfully we saw the way the wind was blowing on interest rates and put most of our savings into fixed term accounts paying well above the miserable 1% BofE interest rate. As these mature in stages over the next 12 months, we'll then be faced with the dilemma of where to put them. If we still had a mortgage, reducing that would have been the No 1 priority, and I suspect far more savers will now be going down that route.

baby_boomer

Stavros wrote: »

I have switched every penny in my cash Isa's to stocks and share Isa's.
The sooner Brown and co and kicked out the better, Savers have been shafted at the ineptitude of the banking industry and government
VOTE BROWN OUT....VOTE BROWN OUT....VOTE BROWN OUT

With such a low level of cash savings, is it wise to take such a risk? You may do very well, but you seem to be letting your anger at the government influence your investment decisions.

I don't understand the premise behind the thread. You can still get 3.75% fixed from reputatable institutions. It's cutting off your nose to spite your face to suggest withdrawing money so you don't take advantage of this rate which is likely to match or beat inflation any time soon.

sh856531

With such a low level of cash savings, is it wise to take such a risk? You may do very well, but you seem to be letting your anger at the government influence your investment decisions.

What are you talking about - I let anger guide all my investment decisions :-)

RayWolfe

Oh, Mr Stavros has a different agenda entirely.

unitedwestand

Linton wrote: »

rather safer than under the mattress

Linton wrote: »

It's too easy to blame other people (governments, bankers etc) when the responsibility is actually yours.

Linton wrote: »

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.

again... you might want to read beyond post one before you spend 10mins drafting up a reply to it.

Money wont be kept under the mattress.
Savers are the furthest away from being responsible for the current climate.
Many did fix at higher rates, including myself.

Some good points on inverting though, which I've said I'll be doing & wont be carrying all eggs in one basket, there will be a slight higher element of risk which I'm willing to take.