How have you benefited from low interest rates?

ellies_angel

DervProf wrote: »

Don't expect my sympathy round here.

You might get some advice though, such as.......

Get a better paid job. I love my job, I love seeing the difference I make to the people I assess, their working practice, which in turn gives a better quality of care and education of the children they work with. :A I am paid well, I was pointing out that not everyone gets a wage rise of 2% per year. :mad:

Invest in property. I have, a lovely 2 bedroom house.

Should have moved to Aberdeen. too expensive and my travel costs would have been much higher traveling from the city to the shire :eek:

It's great out here in Thailand, why not join me ? let me think about it.............errrrrrrrr NO:p

Still on a more positive note my fixed rate ends in June :T

gagahouse

DervProf wrote: »

Don't expect my sympathy round here.

You might get some advice though, such as.......

Get a better paid job.

Invest in property.

Should have moved to Aberdeen.

It's great out here in Thailand, why not join me ?


Seriously though, it does seem that some have benefited greatly from low interest rates, others have not done so well. While savers might be feeling a bit miffed at the moment, I'd rather have savings that are losing a little of their value at the moment, than a pile of debt, no matter how low the interest payments are.

I have no debt and a decent amount of savings so I should be miffed but I can't be, because I understand if there wasn't a bailout there would be no savings and that ZIRP is necessary for the banks to become solvent again. I view it as the cost of the insurance that prevented all my savings from being wiped out and the horrible consequences for us all of a systemic banking collapse.

That being said, I don't like it because it continues the mis-allocation of capital that got us in this mess in the first place. From my work I can see that we're getting back to 2006/2007 levels of banks and hedge funds taking massive punts - this is most obvious in OTC swaps where despite mortgage credit availability being at much lower levels and fixed rates at historically high spreads to central bank rates, volumes of notional (we're talking trillions) have grown 80% for us at least over last year. My friends in the two largest brokers report the same. This tells me the speculative part of the swaps market has grown relative to the hedging part i.e more gambling.

Commodities are another warning sign to me that we're repeating the same mistakes, does anyone truly really believe that there are supply constraints / "excess demand" in all commodities at the same time, that bad weather in Australia (wheat) has an effect on the supply dynamics of oil or cocoa? That demand in all places for all commodities is rising all at the same time. Cotton that's traded in a range of 40-80 for the last decade has more than doubled to 200 in the last six months, opening almost every day limit up locked?

No, the rise of all commodities is a symptom of this mis-allocation of capital that always comes when the cost of money is held artificially low, yes they needed to reflate but it looks like they're losing control.

So yes, do make hay while the sun shines, many of you have rightly taken advantage and reduced your debt, but I suspect we'll be seeing another familiar phrase soon - "there is no such thing as a free lunch" - we'll either pay in the form of higher inflation or higher interest rates.

I do not envy Mervyn's job at the moment.

nic_santorini

Pay freeze for next 3 years
Higher tax payments
Mortgage the same, as it is only 18 months old and £100k bigger than the last one. Still making 20% overpayments whilst the base rate is low and that won't happen when it rises.
Was getting £140 return per month on savings -so ploughed it into a new house and the bigger mortgage above.
ISA return not worth having
Overall - I would say neither won nor lost but everything seems so expensive - especially petrol = changed car to diesel too.

blondegirl88

HAMISH_MCTAVISH wrote: »

I'd disagree.

The average pay rise is around 2% (even today)

Expenditure on goods that have inflated, or that attract VAT, is still a minority of most peoples income.

The part most bears forget, is that if you spend 35% of your income on consumer goods or services that have inflated by 4%, but get a pay rise of 2% on 100% of your income, you're still better off in cash terms. Add cheaper mortgage expenses for those that have them, and it's still a clear win versus 2007 for most mortgage holders.

I do accept there are some people being squeezed, but that squeeze is tiny as an average. Maybe a percent or two less disposable income.

There will always be people at the margins who will be seriously hurt by any increase in costs, but where the bulls and bears disagree is that the bears seem to assume such people are a majority, where the bulls assume they are a tiny minority.

Based on the results so far, (default rates, repo, etc) the bulls are right.

Wish I had a 2% payrise this year! Mine was 0.4% and hubby didn't have a payrise at all!:(

HAMISH_MCTAVISH

Graham_Devon wrote: »

Let me ask you....how many families / people do you know who only spend 35% of their wages each month?

It's a stupid point and only applies to the rich.

To the average person, it doesn't apply at all.

Graham, what percentage of your wages do you spend on consumable goods that are inflating or were hit by VAT rises?

What percentage of your income do you spend on goods or services that are VAT free and/or static in price?

What percentage of your income do you allocate to mortgage, savings, pension contributions, investments, etc?

I spend around 20% of my income on food, goods and bills that are inflating. The rest is mortgage repayments, savings, pension contributions, investments, services, holidays, etc.

Things that are not inflating, in other words. (And before you quibble, my holiday this year is cheaper than last year for a comparable product, my barber hasn't raised his price in 3 years, the things I do for fun have mostly decreased in price as companies get more competitive for business, etc)

Inflation at 4% is meaningless to me and many other people..... My pay rise is 5%, and I reckon I spend just 20% or so of income on things that are inflating.

My personal inflation rate is tiny, my disposable income increases every year. My mortgage as a percentage of income decreases every year.

Now, what would make a dent in my disposable income would be a significant increase in base rates (very inflationary for me and millions others). But even then, the mortgage payment would only rise by a few hundred quid a month, and it'd still be far less than our combined pay rises over the last couple of years.

I accept that there will always be some people on the margins, for whom any rise in cost is very difficult.

But the majority will barely notice it.

And a significant minority will never feel it at all.... With disposable income increasing regardless of inflation.

DervProf

HAMISH_MCTAVISH wrote: »

I accept that there will always be some people on the margins, for whom any rise in cost is very difficult.

But the majority will barely notice it.

Apart from "a few" pensioners.

Oh, and your barber.

And strangely a lot of people I know have noticed it too.


Must be true though, 5% pay rise McTavish says so. :rotfl:

DervProf

ellies_angel wrote: »

DervProf wrote: »

Invest in property. I have, a lovely 2 bedroom house.

Only one ? What you need to do is buy a place for an elderly relative to live in. That way you'll be seen as a kind hearted person, but reap your reward when they pop their clogs. I believe it's called a win-win situation. I wouldn't let anyone know your gameplan though, as they might think that your generous act was not exactly a pure kindness.

DervProf

HAMISH_MCTAVISH wrote: »

20% or so of income on things that are inflating.

Good job your ego doesn't cost anything then, eh ?

Mind you, a big ego can cost you friends.

DervProf

ellies_angel wrote: »

DervProf wrote: »

Still on a more positive note my fixed rate ends in June :T

Just in time for the rate to start rising ???

If you don't mind me asking, what rate are you fixed at ?

Graham_Devon

HAMISH_MCTAVISH wrote: »

Graham, what percentage of your wages do you spend on consumable goods that are inflating or were hit by VAT rises?

What percentage of your income do you spend on goods or services that are VAT free and/or static in price?

What percentage of your income do you allocate to mortgage, savings, pension contributions, investments, etc?

I spend around 20% of my income on food, goods and bills that are inflating. The rest is mortgage repayments, savings, pension contributions, investments, services, holidays, etc.

Things that are not inflating, in other words. (And before you quibble, my holiday this year is cheaper than last year for a comparable product, my barber hasn't raised his price in 3 years, the things I do for fun have mostly decreased in price as companies get more competitive for business, etc)

Inflation at 4% is meaningless to me and many other people..... My pay rise is 5%, and I reckon I spend just 20% or so of income on things that are inflating.

My personal inflation rate is tiny, my disposable income increases every year. My mortgage as a percentage of income decreases every year.

Now, what would make a dent in my disposable income would be a significant increase in base rates (very inflationary for me and millions others). But even then, the mortgage payment would only rise by a few hundred quid a month, and it'd still be far less than our combined pay rises over the last couple of years.

I accept that there will always be some people on the margins, for whom any rise in cost is very difficult.

But the majority will barely notice it.

And a significant minority will never feel it at all.... With disposable income increasing regardless of inflation.

You, are not average, you are on record stating your income is approx 100k several times. Therefore you spend approx 20k on stuff that has inflation (by your description) attached to it. Average household income in the UK is 28k.

I said average.

You missed the point.....again, though did give me the perfect example of what I was talking about, by talking about how much you spend on inflation attracting goods.

In the real world, however, outside of McTavish heights, people would fall over themselves to see their food bills, electricity bills, petrol bills, insurance etc, only come to 20% of their entire income.

As it is, inflationary council tax often eats up 5-10% of a households entire budget.