SOS Save Our Savers

MarkyMarkD

But, C_Mababejive, your post illustrates all that is wrong with SOS and its supporters. Sorry!

Nationwide, for example, is paying around 4% to get savings money in the form of fixed rate bonds of equivalent length as the loans you are talking about.

Lending it out at 7.6% is scarcely a rip-off! Out of that 3.6% margin, Nationwide has to pay its operating costs - which are around 1% - cover bad debts - which are quite high on personal loans - and make some profit.

If you think a margin of 3.6% on that is too high, you really don't live in the real world.

As for SOS's (and your) comments about "real terms returns" - inflation is irrelevant to the amount financial institutions can pay on savings accounts. It is interest margin that pays for costs. Inflation actually just increases those costs more quickly.

Institutions are already competing for savings. Why do you think that best buy savings rates are absolutely miles about Bank of England base rate? It's entirely down to competition for funds.

polyphonic99

I understood Nationwide are constrained by a promise they made in 2000 to their mortgage holders that their SVR (Standard Variable Rate - Mortgage) would never go 2% above Bank of England Base Rate. This promise is currently costing them £450 million a year, which is why they either have to offer less competitive saving rates or charge more for other types of loans. Obviously they could, and might have to, reassess their promise as market conditions change.

http://www.guardian.co.uk/money/blog/2010/feb/02/nationwide-savings-rates

rictus123

Id support it as its a good cause

gozomark

albeit a misguided one....

RayWolfe

Very misguided. However, their hearts are in the right place. Shame about their brains.

tradetime

It's an interesting and I can see an often heated topic.
I don't particularly like banks, I don't think they pay me enough interest, I think they charge too much interest when they lend, etc, etc, etc. Why? Because I am a human being and like most human beings, I want more for less. I want more and more money, and I want to do less and less for it. That, perhaps exaggerated, is human nature

Another way to look at the situation.

Banks are profit making organizations, not charities. Like any profit making organization they seek to make as much profit as they can, and they do this by charging as much for the service they provide as they can, whilst driving down their costs as much as they can. It's no different from any other business in general principle. Savers represent one of those costs.

Money is a resource that the banks use in order to make loans. You as a saver are a supplier of that resource, as with anything, what you get for supplying your resource is a function of supply and demand. As a supplier of the resource (money in the form of your savings) if you don't like the price you are getting from it you are free to take it elsewhere.

In many respects, savers are just people who want money for nothing. I don't criticize the desire, I'd like money for nothing, but I think campaigning for it takes the pi$$ a bit.

Milarky

lisyloo wrote: »

Yes I could do with an explanation too.
I'm getting 3% on my savings but CPI is 2.9%.
I would say it's been better previously in real terms i.e. with respect to inflation.

Just a point above savings interest and the rate of inflation - whilst both are 'trailing' indicators they tend to be 'in tension' somewhat due to the forward statement of interest rates

e.g CPI last December was 2.9% - so the point of reference should be a 12 month period stating in December 2008. The best rate available around that time was 6% (eg Halifax GR Saver during Nov 08) So that's a single account which was clearly beating 'inflation' by about 3%. But how did other accounts (i.e. the average of all deposits) do eh? I'm guessing the average was around 2% allowing for all the variable rate reductions throught early 2009. 2% does not beat inflation.

So in order to be able to sweep people aside and (in effect) tell them they are doing very nicely thank-you this time around one needs to project average savings rates for a year ahead (say 2.5%?) compared to a likely inflation rate in January 2010 (say 4%?) Hmm, not looking too good is it?

I would say therefore that the best one could hope to beat inflation by in the next 12 months is 1.25 or 1.5% (not counting the tax)

Milarky

Aegis wrote: »

Traditionally RPI has usually been quite a bit higher than CPI, but surprisingly there were few complaints about pensions being increased by more than necessary in the years running up to the inversion.

I don't see that should be the case CPI and RPI use different weights, but they should be the same on average over time surely? The way to check is see what level the indices now stand at - they should be showing pretty near the same rise over (say) the last 60 months. If not, there "thar be cheatin'" involved

Aegis

Milarky wrote: »

I don't see that should be the case CPI and RPI use different weights, but they should be the same on average over time surely? The way to check is see what level the indices now stand at - they should be showing pretty near the same rise over (say) the last 60 months. If not, there "thar be cheatin'" involved

Not everything increases in price at the same rate, so I'd say "no" to that question. Different ways to measure inflation will have different long term trends precisely because the amount of inflation isn't a single measurable quantity but an average value of lots of different rising prices weighted according to some model that someone came up with.

There's definitely nothing stopping inflation measures from having very different values over time.

gozomark

CPI and RPI not only have different weights, but also different methodologies - CPI allows for consumer substitution, RPI doesn't

RPI has averaged 0.5% more than CPI over the long term, a lot of this is due to substitution