MSE News: Base rate held at 0.5% again

brit1234

rickbonar wrote: »

I think the inflation wipes out any gain from the interest.

It depends what type of inflation you are talking about and what you are saving for.

In my case I am saving for a house and house prices are falling. So I get 3.05% on my saving which is bumped up a lot higher from house price inflation.

However interest rates need to rise. It seems we are rewarding the greedy and reckless at the expense of the responsible and prudent.

lisyloo

What savings accounts pay that?

My view is that you don't have god given right to inflation plus returns with no risk.
Why should you?

If you want higher returns then invest in something (businesses, people jobs etc.) and get rewarded appropriately.
If you only want to lend to banks and be protected then you'll have to do it on THEIR terms which aren't that great after a banking crisis.

rickbonar

lisyloo wrote: »

My view is that you don't have god given right to inflation plus returns with no risk.
Why should you?

If you want higher returns then invest in something (businesses, people jobs etc.) and get rewarded appropriately.
If you only want to lend to banks and be protected then you'll have to do it on THEIR terms which aren't that great after a banking crisis.

What's the point of saving then?

Thrugelmir

rickbonar wrote: »

What's the point of saving then?

So you have no need to borrow.

Best return one can make is not to pay interest charges at all.

JamesU

Engeroosi wrote: »

I just wish I had took out a tracker mortgage the month before the rates tumbled BoE rate + 0.49 or something!!! Think I would be pretty much mortgage free by the time the rates rise again!!!!

Many people who opted for a BoE rate tracker prior to the reduction in interest rates had no knowledge that BoE rates were about to drop so dramatically and for so long. For example in May 08 it was possible to take out a tracker at BoE + 0.39% with one phone call and no transfer costs, but at that time there were also better fixed rate offers available, around 4.25% from memory. So trackers were not the optimal deal then. Hindsight seems a great thing, but the reality at that point in time was quite different.

There is a big difference between wishing to have done something different in the past with hindsight, and making the best rational decision possible at that particular point in time.

JamesU

rickbonar

Thrugelmir wrote: »

So you have no need to borrow.

Best return one can make is not to pay interest charges at all.

I do have credit cards but always pay them in full when they are due so don't ever get interest charged. (though there is a serious argument for getting more for as much credit as possible and spending yourself silly and then declaring bankruptcy) May as well join everyone else!

My point is that not only do the bank saver interest rates not match the inflation there are things like the recent electric and gas price hikes that go way beyond inflation stats. Now I don't think the basket of goods for RPI rate includes these.

Really I think it shows just how the pound has devalued against most other currencies so it's like a double whammy. (The gas and electric suppliers are paying the international price rate to wholesale for coal and plant).

DarkConvict

The drop in rates have almost frozen spending for me and my mom, who are dedicated savers. But now the interest is so low, my mom who is retired is having to use those savings to survive against rising costs of living.

Whilst I am happy for those who are paying of the mortgage, some benifit and some lose. Savers will in my opinion not be the only losers. Those on this forum ar ehere because they are money savers, so will takes those savings to pay off a mortgage.

My concern is those on a mortgage, have used these low rates in the following ways.
1) Pay of more of there mortgage
2) Save the money
3) Spend the money
4) Take on additional contracts

My concern is those on option 3) and option 4). I've spoken to bank advisors when I was opening saving accounts and they agree in what I think are the options people take. If people use the extra money not against the mortgage but for a better standard of living, especially if that extra standard is tied to contracts, Gym, Mobiles, Internet, TV, Insurances, list goes on. Then when the rates rise and they will rise they will suffer badly for it. And those in my category 4, will be tied into more than they can afford. And after being on the DFW forum helping people, its a bad circle and almost impossible without support and dedication to get out of.

StephenM_2

JamesU wrote: »

Many people who opted for a BoE rate tracker prior to the reduction in interest rates had no knowledge that BoE rates were about to drop so dramatically and for so long. For example in May 08 it was possible to take out a tracker at BoE + 0.39% with one phone call and no transfer costs, but at that time there were also better fixed rate offers available, around 4.25% from memory. So trackers were not the optimal deal then. Hindsight seems a great thing, but the reality at that point in time was quite different.

There is a big difference between wishing to have done something different in the past with hindsight, and making the best rational decision possible at that particular point in time.

JamesU

I re-mortgaged to a fee-free lifetime tracker in September 2007, but it wasn't due to brilliant foresight over interest rates. It was because my mortgage is relatively low (now down to below £24k) and I didn't want a short-term fix with the likelihood of having to re-mortgage a few years later with a relatively high fee compared to the value of the mortgage.

dave_j

I took the leap 9 years ago to take on a large mortgage £270k which was a bit daunting i must admit.
i have had 3 remortgages since then - all with free setup costs and was lucky 4 years ago to obtain a lifetime base rate tracker repayment mortgage of bank base rate + 0.17%.
so for the last 2 years i have been paying 0.67% interest on my current mortgage.
as i have kept paying the same amount for 9 years i am reaping the rewards and have knocked £100k off my initial mortgage sum .

i know that many savers want the rates to rise asap but for me personally a few more years at low rates will be a great result.

hopefully, i aim to be mortgage free in about 10 years time with a property worth in excess of £600k.

fingers crossed.

RenovationMan

dave_j wrote: »

I took the leap 9 years ago to take on a large mortgage £270k which was a bit daunting i must admit.
i have had 3 remortgages since then - all with free setup costs and was lucky 4 years ago to obtain a lifetime base rate tracker repayment mortgage of bank base rate + 0.17%.
so for the last 2 years i have been paying 0.67% interest on my current mortgage.
as i have kept paying the same amount for 9 years i am reaping the rewards and have knocked £100k off my initial mortgage sum .

i know that many savers want the rates to rise asap but for me personally a few more years at low rates will be a great result.

hopefully, i aim to be mortgage free in about 10 years time with a property worth in excess of £600k.

fingers crossed.

That sounds brilliant. Good luck with your aims!