two interest rates? one for savers and one for borrowers?

maveli

lukekelly wrote: »

And that is paid for by reducing the interest paid to everyone else, meaning that pensioners have smaller savings on which to earn interest! Maybe not such a good deal...

Not so. Last time I was there (4 months back) I went for a 1 yr fixed deposit and offered an IR of 10% and the bank manager told me if I add my Da'd also to the deposit I will get 12%.

lukekelly_2

That's less than the Indian rate of inflation at the time, it's a worse rate than pensioner's get in the UK at the moment!

And even if that wasn't so, the point still holds: you'd have been getting 10% interest to subsidise the elderly getting 12% interest. The alternative would be for everyone to get 11% (say) which would result in you having more savings when you reach retirement. You can't just increase interest rates for one section of population, you have to take that money from elsewhere.

Debt_Free_Chick

dealsearcher wrote: »

The amount of money available for banks for lending is dependent on savers depositing money.

That used to be the case but one of the key reasons for the current situation is that lenders went beyond this. They didn't simply lend savers' money - they borrowed money from elsewhere to lend out for mortgages. In other words, they lent money they didn't have and had to collect the repayments from their debtors in order to pay their creditors.

pickles110564

Generali wrote: »

The Bank of England has traditionally had a single rate of interest known as the Repo Rate or Base Rate - that is the rate of interest at which the BoE will lend money to banks against the security of Gilts which in turn impacts the price banks have to pay to borrow money to lend to you and me.

The Bank of England at present doesn't take money in from savers in the way that I suspect you mean and so has only a very indirect influence over the rate of interest they receive.

The simplest way to explain what is going on right now between the Government's spending plans and the Bank of England's plans for printing money is that it's all a complete and utter disaster.

There's little or nothing you can do about it so just enjoy the ride and it'll most likely work out ok in the end. Things usually do.

Nice to see you back again.

leveller2911

Thrugelmir wrote: »

Both Northern Rock and Coventry BS are offering fixed term deposit rates for savers over 3% Gross. So its untrue that savers are being hard hit.

More likely that savers still expect rates as offered by IceSave etc which were always unsustainable.

It will be interesting to see the views of the posters on here who are saying savers are not being hit hard in a year or so time when rates begin to climb up and up and up...:D

trenchwars

dealsearcher wrote: »

The amount of money available for banks for lending is dependent on savers depositing money. These very low interest rates will mean that more and more savers will be withdrawing their money from saving accounts. Doesn't this defeat the whole object of the exercise?

Who needs savers when you've got a limitless cash machine in the form of the BOE.

poppysarah

Capital One wrote recently to explain that the cost of borrowing was up and so they had to pass this on by upping their own interest rates.
Shame the banks are borrowing my money at a piddlingly small %...

1984ReturnsForReal_2

white_noise wrote: »

two interest rates? one for savers and one for borrowers?
this may sound like a really strange idea and likely stupid, but what is it that stops the bank of england having 2 types of interest rate, one for borrowers and one for savers, thus they could reward one and punish the other depending on the circumstanes at the time?
anyone?
WN

And then we have the credit card rates that have increased....

Thrugelmir

Cannon_Fodder wrote: »

The BEST rate being the same as RPI, is exactly 0% use to man nor beast.

Ok, its better than an actual 0%, and may improve if RPI keeps dropping and they don't drop the savings rates by another 0.5% to follow the BoE.

Those who got Icesave etc, are internet literate and "mobile" with their savings, imo. They can find the next best deal.

The people who are getting hit, are those pensioners and others who are less financially "mobile", don't even have a PC often, who stuck their savings somewhere consistent and solid at say 4%, and now are getting 1% or less.

To lose 75% of your discretionary income, as they often live off interest to top up meagre pensions, is a disgrace in this era, in the modern world.


Part of Govt deals on bail-outs, recapitalisation, mergers that have been waived through competition laws etc etc, should be included clauses to enforce minimum savings rate of say 2%.

And all those 0.01% "savings" accounts out there should be banned under trade descriptions laws!!

I may be wrong, but I think historically average rates of interest on deposits have fallen short of the RPI. Going back a number of years cash was held for emergencies not to provide investment income.