savings V inflation

CrashJPMorgan

Hi all,

According to the government's national statistics site, currently:
CPI inflation 4.0%, RPI 5.1%

Thus, in order NOT to lose money, your bank account would have to be earning 4% or greater, which I'm sure the vast majority of people's accounts are not.

The information seems to be this will result in interest rate rises soon-ish, which will lead to higher mortgage payments, thus I assume if one has more of a mortgage than savings, then you will be worse off. If you have more savings than your mortgage, you will be better off. Of course, many are not in the latter group.

So the advice seems to be, pay off as much debt as you can (isn't this always the advice?), especially if you have a mortgage thats not locked in.

Inflation is often called "the hidden tax", and I often wonder if people are aware of the stealth nature of inflation which constantly eats away at people's savings.

ses6jwg

Most of us are very aware and instead of moaning about something we have no control over, we are moving portions of our monies into equities in search of greater returns.

Nikel

You can also look at your personal rate of inflation rather than the average based on a basket of goods chosen by someone else.

cloud_dog

CrashJPMorgan wrote: »

The information seems to be this will result in interest rate rises soon-ish, which will lead to higher mortgage payments, thus I assume if one has more of a mortgage than savings, then you will be worse off. If you have more savings than your mortgage, you will be better off. Of course, many are not in the latter group.

So the advice seems to be, pay off as much debt as you can (isn't this always the advice?), especially if you have a mortgage thats not locked in.

Inflation is often called "the hidden tax", and I often wonder if people are aware of the stealth nature of inflation which constantly eats away at people's savings.

There are different aspects to inflation but, if we get long-term inflation and if that leads though price inflation to wage inflation the best scenario would be to have lots of debt at fixed rates of interest so that your repayments remain constant (low), your debt is eroded by inflation (becomes worth less), and your wages increase in line with (or above) inflation.

Unfortunately that will make UK Plc workforce uncompetitive (high wages) and would lead to economic problems. Having said this, it needs to be considered in the context of a global economy and the effects of exchange rates etc.

Loughton_Monkey

CrashJPMorgan wrote: »

Hi all,

According to the government's national statistics site, currently:
CPI inflation 4.0%, RPI 5.1%

Thus, in order NOT to lose money, your bank account would have to be earning 4% or greater, which I'm sure the vast majority of people's accounts are not.

Thanks for this. But I'm am pretty sure that at least one or two of the regular posters around here cottoned onto this one a little while ago...

CrashJPMorgan wrote: »

The information seems to be this will result in interest rate rises soon-ish, which will lead to higher mortgage payments, thus I assume if one has more of a mortgage than savings, then you will be worse off. If you have more savings than your mortgage, you will be better off. Of course, many are not in the latter group.

Well it's not as though the former group haven't been warned to 'fix'. So they are, in a sense, victims of their own inactivity perhaps. As to the latter, where do you get the impression that savers will be better off? What makes you think that banks will maintain the rather 'generous' premium of 2½% above Base Rate?

CrashJPMorgan wrote: »

So the advice seems to be, pay off as much debt as you can (isn't this always the advice?), especially if you have a mortgage thats not locked in.

Good job I followed the reverse of this. With Mortgage Rate of only 1% over base, and with an offset mortgage, are you saying I was a bit silly to draw out the fully-offset mortgage amount and invest it at 3.85%?

CrashJPMorgan wrote: »

Inflation is often called "the hidden tax", and I often wonder if people are aware of the stealth nature of inflation which constantly eats away at people's savings.

Well we are now, thanks to this enlightening post.

CrashJPMorgan wrote: »

Want to make the banks pay?
Crash JP Morgan, buy silver.

Bets now being taken on how long before you are asked to remove your sig.

Forum_User_2

Money is money, you aren't "losing" money just because of inflation. In reality, prices for most goods don't go up in line with inflation. This whole garb about inflation making money 'worth less' than before is not real.

StevieJ

CrashJPMorgan wrote: »

So the advice seems to be, pay off as much debt as you can (isn't this always the advice?), especially if you have a mortgage thats not locked in.

Inflation is often called "the hidden tax", and I often wonder if people are aware of the stealth nature of inflation which constantly eats away at people's savings.

Not if you have a tracker mortgage at BR+.95% it isn't

opinions4u

Forum_User wrote: »

Money is money, you aren't "losing" money just because of inflation. In reality, prices for most goods don't go up in line with inflation. This whole garb about inflation making money 'worth less' than before is not real.

Inflation is very real.

While it affects different people with different spending habits in different ways the medium term impact of inflation can devastate the spending power of your savings.

Unchecked inflation tends to lead to higher costs for business which can then, in turn, lead to jobs being lost and moved overseas.

CrashJPMorgan

ses6jwg,
It is often thought we have no control over inflation, but part of inflation is linked to monetary policy and since we apparently elect members of parliament who oversee financial regulation, we can have some control over it.

Loughton Monkey,
I was not referring to the past, but the present and primarily to the future. Hence my use of "currently" in my post. Thus, in the past if you did what you did, yes you may have been marginally better off, but if you locked it in too long, with rising inflation and interest rates it will work against you.

cloud_dog,
I found your post interesting, thanks.

StevieJ,
I did not understand your post. If inflation leads to higher interest rates, if you paid more of your mortgage off now you'd be better off in future.

Forum_User_2

opinions4u wrote: »

Inflation is very real.

While it affects different people with different spending habits in different ways the medium term impact of inflation can devastate the spending power of your savings.

Unchecked inflation tends to lead to higher costs for business which can then, in turn, lead to jobs being lost and moved overseas.

It depends what kind of stuff you buy. Yeah, if you're buying loads of weird stuff, it may cost more. Normal things stay the same price. So it isn't really that relevant.

opinions4u

Forum_User wrote: »

It depends what kind of stuff you buy. Yeah, if you're buying loads of weird stuff, it may cost more. Normal things stay the same price. So it isn't really that relevant.

The weird stuff I buy that hasn't stayed the same price recently includes things like bread, milk, eggs, petrol, lunch in the work canteen, a cup of tea at work.

So it's completely relevant.

What a bizarre post!