Why are savings rates on the floor?

C_Mababejive

You've got two choices,spend it and capture your money's current value, or keep it and lose value.

HM Government and the banks dont care about you. They are making you,me and other savers the falls guys for their failure and you are being made to pay for it. Its as simple as that.

pearl123

Two years ago I could had nabbed a fixed rate bond for 5% for 5 years with BMidshires. I wish I had.

nilrem_2

pearl123 wrote: »

Two years ago I could had nabbed a fixed rate bond for 5% for 5 years with BMidshires. I wish I had.

Hindsight is great isn't it! Don't blame yourself, a lot of us are in the same boat and in fairness since 2009 many experts continually predicted that rates would rise in the near future and advised caution about fixing too long!

nilrem_2

Glen_Clark wrote: »

Save our Savers would do better to focus on inflation rather than interest rates. 0% interest and 0% inflation would be better for savers than 10% interest and 10% inflation (because savers would get less than 10% interest after tax)

With respect that is not always the case, there are some people who due to circumstances do not get a pension and depend on savings interest for income, if the rate was zero they would have nothing to spend, in which case it does not matter how low inflation is they just won't have the cash to spend. Of course they could spend their savings but when they run out they are stuck!

At least with a decent savings interest and higher inflation one has some income to spend and one can choose what to buy and what not to buy, with zero interest you just have nowt to buy anything with!

CLAPTON

nilrem wrote: »

With respect that is not always the case, there are some people who due to circumstances do not get a pension and depend on savings interest for income, if the rate was zero they would have nothing to spend, in which case it does not matter how low inflation is they just won't have the cash to spend. Of course they could spend their savings but when they run out they are stuck!

At least with a decent savings interest and higher inflation one has some income to spend and one can choose what to buy and what not to buy, with zero interest you just have nowt to buy anything with!

well the reality is that if you receive 3% interest and inflation is 5% then you are actually spending your capital.

just as if interest rates were zero and you simply spend some of your capital

Thrugelmir

CLAPTON wrote: »

well the government is flooding the market with cheap money so the banks don't really need your money.

There's a shortage of money.

Savers chasing the highest rate merely moves what's on fixed term deposit around the system on maturity. Which merely forces higher the cost of borrowing.

Given we need growth in the economy. An orderly exit from the years of easy credit are required.

nilrem_2

CLAPTON wrote: »

well the reality is that if you receive 3% interest and inflation is 5% then you are actually spending your capital.

just as if interest rates were zero and you simply spend some of your capital

But if savings rates were zero there would be little point in keeping funds in the bank as the next step they would be charging us to save with them effectively a negative interest rate!
Come to think of it some banks are paying such low rates it would not surprise me if they did start imposing a negative rate!

nilrem_2

What would happen if savers started a mass withdrawal of their savings from the banks? would they tend to start increasing rates to entice savers back or would they just ask the BOE for more cash?

It's a genuine question what do others think would happen?

Sstripey

marathon_man wrote: »

Try Punjab Bank's rates here:
http://www.pnbint.com/fixed-deposits.asp

If you move REALLY FAST then you might still be able to get their November 2012 rates, which are even better than these, e.g. the 5-year fixed rate is 4.5% rather than the 3.9% offered from 1st December. I've just applied and was told that the November rates will be honoured as long as the payment in clears by November 30th (Friday). Punjab have a number of branches in the UK, so it would be possible to go in person to open an account. They are covered by the FSCS scheme up to the usual £85000.

If interested, give them a ring to find out what documentation they require - also worth looking at, though with rates not as high, are State Bank of India and the Bank of Baroda.

There are a few threads on Punjab elsewhere on MSE.

Glen_Clark

nilrem wrote: »

But if savings rates were zero there would be little point in keeping funds in the bank as the next step they would be charging us to save with them effectively a negative interest rate!
Come to think of it some banks are paying such low rates it would not surprise me if they did start imposing a negative rate!

You still don't get it do you.
Inflation is more important to cash savers than interest rates.
The banks are already effectively paying a negative rate because interest rates are below the real rate of inflation. So, in real terms, borrowers pay back less than they have borrowed.
If interest rates were 10% and inflation was 10% you would be fooling yourself if you thought you are getting any income. After basic rate tax you would only get 8% so in real terms your savings pot is declining by about 2% every year - even before you take anything out.
Unless net interest rates are higher than the real rate of inflation, you are living off your capital.