Attention Savers.,...

HAMISH_MCTAVISH

There are a lot of posts on the boards from savers wanting high interest rates.

So the question is, who do you want to lend to at these high rates?

And for whom does it make sense to borrow at these high rates?

As a saver, you are actually a lender. You lend your money to the bank, the bank relends your money to a borrower and takes a commission.

So when you expect 5%, 6%, 7% returns on savings, you are expecting borrowers to borrow your money at 7%, 8%, 9%, etc....

Now who is it you think wil be:

1. Willing to borrow money at 8% or 9%

2. A safe risk to lend your money to at those rates

3. Able to make a prudent commercial or financial decision to make a return from borrowing at those rates.

Answers on a postcard....

bendix

Borrowing rates of 8-9% are the historic norms. People have borrowed at those levels for decades. You seem to think today's current interest rate environment is the norm - it isn't.

CloudCuckooLand

Plenty of FTBs having to stump up 6% at the moment.

If 4% was commonplace it would help a lot of savers.

Why does every example have to be about extremes, black and white?

I don't see why the BoE couldn't put rates to 2%, without damaging the recovery very much, if at all.

Companies tend to complain about the absence of lending at all, not the rate.

Happychappy

What a load of tripe, so your are saying to savers, hush little ones, be grateful that I am borrowing from you at a low rate and making profit, thank you poor person, you really are a saint.

So what should or could I have done when I paid 15% interest on my mortgage in 1981? answers on a postcard.

HAMISH_MCTAVISH

bendix wrote: »

Borrowing rates of 8-9% are the historic norms. People have borrowed at those levels for decades.

When inflation (and wage inflation) was generally in double digits, for the decades you'r referring to anyway.

You seem to think today's current interest rate environment is the norm - it isn't.

Nor is the interest rate environment from the 60's to 90's. That was the highest rates in the 300 years of interest rate history, and equally abnormal.

HAMISH_MCTAVISH

Happychappy wrote: »

What a load of tripe, so your are saying to savers, hush little ones, be grateful that I am borrowing from you at a low rate and making profit, thank you poor person, you really are a saint.

No, I'm asking who you think is a safe risk to lend money to at 9% today.

So what should or could I have done when I paid 15% interest on my mortgage in 1981? .

As did I in 1990.

But it didn't exactly work out very well for the economy in 1981 or 1990....

HAMISH_MCTAVISH

There's a clear intellectual disconnect here from the raise rates brigade.

You want rates to rise.

You want banks to be more prudent.

You want borrowers to pay more for your money.

But you can't seem to list any low risk entities, business or individuals, for whom it would make commercial or financial sense to borrow your money at those prices.

Without borrowers willing and able to safely repay the money you lend at those rates plus the bank commmission, you cannot get a return at those levels.

So again, who do you expect to borrow the money?

Happychappy

The banks backed by the FSA are a safe risk to me a poor saver? I have a day job and entrust the financial institutions to make huge profits, I really am not bothered of they lend to the Colombian drug cartels, I am trying to get value for my savings, and would love 15% interest rates to return, I suppose I could say, purely my own opinion ; )

HAMISH_MCTAVISH

Happychappy wrote: »

The banks backed by the FSA are a safe risk to me a poor saver? I have a day job and entrust the financial institutions to make huge profits, I really am not bothered of they lend to the Colombian drug cartels, I am trying to get value for my savings, and would love 15% interest rates to return, I suppose I could say, purely my own opinion ; )

Well, at least you named probably the one entity on earth for whom it would make commercial sense to borrow at those rates.

So I've thanked your post.

Happychappy

I take it you mean the Colombians? is that because they are more trustworthy than the bankers ; )

DervProf

HAMISH_MCTAVISH wrote: »

But you can't seem to list any low risk entities, business or individuals, for whom it would make commercial or financial sense to borrow your money at those prices.

Without borrowers willing and able to safely repay the money you lend at those rates plus the bank commmission, you cannot get a return at those levels.

So again, who do you expect to borrow the money?

Hamish, you are implying that there aren't many borrowers who are "safe" to lend to, yet I'm sure you posted something about a 95% mortgage being made available by a lender, and you keep calling for the banks to lend to FTBs again. Is it "safer" to lend smaller amounts at a higher IR, or larger amounts at a lower IR ?

And I'm willing to take a small "hit" on my savings if it means a gradual return to banks not taking bigger risks, ie high LTV mortgage lending, and a reduction in the population's overall exposure to debt.