for those who want the base rate to rise

Sibley

How many people were forced to go into the banks and forced to take on 125% mortgages? or for that matter self cert and interest only with no repyment vehicle in place to pay off the mortgage?

I've got news for you. There are hardly any repossesions.

Oh and we kept rates at 0.5 this month. Rates are not going anywhere. Stop wishing bad of homeowners. We need to get some meat on the bone. Only a fool wishes for high interest rates.

We want some money in our pockets.

leveller2911

Sibley wrote: »

I've got news for you. There are hardly any repossesions.


The sh1ts not hit the fan yet and the longer they resist in raising rates they are storing up even more trouble for the future....


Oh and we kept rates at 0.5 this month. Rates are not going anywhere. Stop wishing bad of homeowners. We need to get some meat on the bone. Only a fool wishes for high interest rates.

We want some money in our pockets.

I'm not , I'm wishing for equality instead of Savers propping up the [EMAIL="f@ckless"]f@ckless[/EMAIL]

Time will tell Sibley time will tell.....He who laughs last laughs longest.;)

JP45

Interesting article from Jeremy Warner in today's Telegraph questioning whether there might not be better and fairer ways (with respect to savers) of supporting overborrowed householders than the current policy of exceptionally low interest rates. Not sure I agree with him (eg his suggestion re Stamp Duty / MIRAS, given the fiscal constraints) but its worth a read:

Much more concerning is the way ultra low interest rates have become a life sustaining prop for Britain's over indebted households. At the trough of the banking crisis, nobody either in or outside the Bank of England would have dreamt that nearly two years later bank rate would still be close to zero, still less would they have imagined that with the inflation rate bounding away towards 5pc, there might be a perceived need for yet more quantitative easing. What was intended as emergency therapy has become the new normality.

So seriously entrenched in the nation's psyche has ultra loose monetary policy become that it is now quite widely assumed the economy couldn't withstand almost any rise in interest rates without triggering mass household insolvency and another recession.

One of the most articulate proponents of this view is Fathom Consulting's Danny Gabay. He's used the expression "zombie households" to depict the disproportionately high numbers of home owners trapped by excessive debt.

For significant numbers of mortgage holders, a rise in rates of even as little as two to three hundred basis points would increase debt servicing costs by 100pc or more. Many more would find their finances stretched to breaking point.

As it is, substantial numbers of homeowners look set to be plunged into negative equity. We've already seen a roughly 18pc nationwide fall in house prices since the peak. Market derivatives indicate that in nominal terms, house prices will be the same in six years time as they are now, which implies a real terms peak to trough correction of well in excess of 30pc. That's much bigger than occurred in the early 1990s, when millions found themselves in negative equity. Rising unemployment would deliver the final coup de grace.

I'm not saying this analysis is wrong, but I do question whether the maintenance of ultra low interest rates is the best way of insulating the economy from the consequences.

Everyone agrees that the root of the crisis was borrowing too much and saving too little. To respond by forcing savers to offer a negative rate of interest to distressed borrowers just seems perverse. When you consider that most households in Britain are actually net savers, the policy looks more debatable still. The thrifty majority is being forced to pay for the sins of the profligate minority.

Mervyn King, Governor of the Bank of England, says he understands the frustrations of savers. Yet he asks them, in effect, to shoulder the brunt of the inflationary adjustment to wealth.

The politics are easy enough to understand, but the economics are indefensible. By supporting housing investment, the effect of negative real interest rates is to perpetuate a fundamental misallocation of capital at the heart of the UK economy – housing.

The intention is to spread the household adjustment over a period of years, so that its impact on jobs, consumption and confidence won't be so bad. But if the consequences of that policy are that savers get hammered, the Bank of England's credibility goes out the window, and there is a further loss of economic competitiveness, you have to wonder whether it is a price worth paying.

As things stand, there is no mechanism for proper price discovery in the UK housing market, with potential purchasers holding off in the expectation of lower prices and sellers still clinging to the expectation of pre-crisis prices. Transactions are at a standstill. The whole housing market needs to be rebased at affordable levels. Until that happens, you won't see any durable recovery in household finances.

There are better ways of supporting over borrowed householders, if that's what the Government wants to do, than through interest rates. Banks could much more usefully be lent on to provide mortgage payment holidays than to load up SMEs with loans. Stamp duty could be suspended, or Miras reintroduced. Whatever the solution, deliberate destruction of savings is no way to run an economy.

Gorgeous_George

Savers are getting the 'going rate'. The rate that banks offer is the going rate.

I have cash ISAs earning 4.5%+, NSandI RPI trackers at inflation +1% (tax free), a First Direct regular saver at 5% (8% available now) and a little lent in social lending sites earning more than inflation after costs and tax.

The in-fighting is pointless. Unlike the bankers, politicians and the rest of the super rich, we ARE in this together.

GG

MegaMiniMouse

JP45 wrote: »

Interesting article from Jeremy Warner in today's Telegraph questioning whether there might not be better and fairer ways (with respect to savers) of supporting overborrowed householders than the current policy of exceptionally low interest rates. Not sure I agree with him (eg his suggestion re Stamp Duty / MIRAS, given the fiscal constraints) but its worth a read:

Like I say, 'uncharted waters'!

Anybody's guess is as good as any other's...

MMM

Generali

MegaMiniMouse wrote: »

It is the banks' profits which you are 'subsidising' - borrowing rates are HIGH, only savings rates are tied to the BoE bank rate

MMM

At present you can get 2.8% from ING (2.9% from Northern Rock or the Post Office for non-Labourites that would trust this Government with their money). That's 2.3% above the base rate.

When the base rate was around 5%, the Icelandic banks (ie high risk so had to offer high rates) were paying a little over 6% from memory.

I would argue that savings rates are very high compared to the base rate. It means a bank is prepared to pay hugely more to borrow money from you than it can borrow from the Bank of England. It's bordering on the philanthropic.

asc99c

Meanwhile I'm getting about 17% on an investment account. I withdrew £600 after some Christmas overspending, and the value has already increased by more than that in the month since then. Stop worrying about the base rate, put your money to work and there are plenty of returns to be had.

MegaMiniMouse

Generali wrote: »

At present you can get 2.9% from the Post Office. I would argue that savings rates are very high compared to the base rate. It means a bank is prepared to pay hugely more to borrow money from you than it can borrow from the Bank of England. It's bordering on the philanthropic.

There is a very small number of savings accounts paying worthwhile interest - the Post Office account is operated by an Irish Bank!

MMM

MegaMiniMouse

asc99c wrote: »

Meanwhile I'm getting about 17% on an investment account. I withdrew £600 after some Christmas overspending, and the value has already increased by more than that in the month since then. Stop worrying about the base rate, put your money to work and there are plenty of returns to be had.

If it sounds too good to be true, then it probably IS too good to be true...

asc99c

MegaMiniMouse wrote: »

If it sounds too good to be true, then it probably IS too good to be true...

Well the money isn't guaranteed - stock markets can and do crash badly. I put my money into investments after the recent crash, and it's risen with the markets since then.

It isn't a case of sounding too good to be true, just that risks can bring rewards. In a savings account your money is just sat there not doing much for the economy. And clearly the BoE don't want that situation right now.

I was going to put £2000 into ARM stocks last April, but decided I didn't want the higher risk of dealing shares in individual companies. I'd now be looking at £5000 if I'd done it. There are definitely ways to get returns on your money.