Interest Rates

melbury

I was reading an investment magazine sent to me from HG and there is an article about interest rates in it that makes very depressing reading.

Says that experts are predicting that base rate will fall to 0.25% by next year and then a very gradual increase back to 1% by 2019/2020:eek:

This is so awful, it has already been so low for so long and still no signs of it moving up:(

What are people to do?

youngsaver1995

What magazine did you read this is in? I would not take that seriously to be honest.

I think the Bank of England are unlikely to lower interest rates any further, as lowering interest rates in my opinion has not had the desired effect during the recession. The UK is in a liquidity trap and lowering rates further is really not going to have much effect.

As for interest rates not rising to 1% until 2019/20, how can anybody realistically say that that will be the case. As soon as the UK is on a clear path to recovery, interest rates will gradually start to increase. Interest rates are as the article says, unlikely to rise in the near future, but saying that they wont rise until 2019 implies that no growth will be achieved in that time, which to be seems extremely unlikely. I'm going for interest rate rise by 2015 if the the EU issues etc can be resolved.


Thats my thoughts, I could be completely wrong.

melbury

It was the latest issue of Investment Times sent by Hargreaves Lansdown - the article was by Ben Brettell, Economics Editor.

It does say "with markets predicting interest rates won't reach 1%........."

Perhaps they are just trying to encourage people to invest more in funds??

All in all pretty depressing though.

youngsaver1995

melbury wrote: »

It was the latest issue of Investment Times sent by Hargreaves Lansdown - the article was by Ben Brettell, Economics Editor.

It does say "with markets predicting interest rates won't reach 1%........."

Perhaps they are just trying to encourage people to invest more in funds??

All in all pretty depressing though.

Oh Lol, if it wasn't for the fact that the magazine and editor has invested interest (pardon the puns) in people investing money rather than saving it, I'd say I was being stupid for disagreeing.

It is a depressing thought, I would love to be getting the 7% interest rate that I once got on £500 savings on my £6500 now. Interest rates aren't going to rise for a while that's for sure, but I would still have to disagree with it taking 7 years, 2-3 is more realistic I think.

innovate

Hope you are right, youngsaver1995, though it has happened before that interest rates stay in the doldrums for ages. Just look at Japan - they have had near zero for over 15 years.

C_Mababejive

Savers...Here is my advice for what it is worth.

The banks and Building societies dont need your money now. HM Government has given them lots of money free of charge. Thats why they are mugging savers. Whilst your money rests on their balance sheets, its value is going in reverse big time.

If nothing else, draw it out,spend it,store it at home,whatever.
As an example of investing in the right funds which hedge against inflation to some degree ,,on 31/08/2012 i invested some money in such a fund. As of now it has increased in value by 11.8% net

youngsaver1995

innovate wrote: »

Hope you are right, youngsaver1995, though it has happened before that interest rates stay in the doldrums for ages. Just look at Japan - they have had near zero for over 15 years.

Very true, I suppose I like to be optimistic about these things, and being 17, I probably don't really know what I am talking about :rotfl:.

ColdIron

A little while back I passed up a 3 year fix paying 4% because I didn't want to get locked in to a low rate because things *had* to get better, well ...

bigfreddiel

youngsaver1995 wrote: »

but I would still have to disagree with it taking 7 years, 2-3 is more realistic I think.

that's what i thought 2-3 years ago - glad i tucked away £11kina 5yr 5% cash isa then rather than waiting for things to pick up!

guitarman001

Pretty much like Japan, yeah..

Rates will be low for years to come. It's all down to folks who've got massive mortgages - they're paying their homes off with ultra low rates while we get next to nothing - otherwise they'd go bust and so would more banks. Government thinks a bit of inflation will erode the debt but if wages don't pick up, the wage:asset price ratio stays the same - unaffordable for the next generation.

I lost a lot of money in dodgy shares recently so am hesitant about anything other than cash accounts. Saying that, I do believe the pound to be seriously devalued over the coming years - so gold thoughts are on the backburner (hesitant, though).. and I'm thinking about chucking a lot into Vanguard in my S&S ISA. I'll be hitting the 40% bracket now and would rather not pay an extra 20% tax on already paltry taxed interest. But I'm so risk averse right now. It's a real bummer. I should've probably left the country when I got the chance. I don't see it getting better from any perspective - finance is shaky, oil seems to be dwindling, you can't build a fortune as a country trading houses between each other at inflated prices.. so what is there? Best off with Oz for mining, Germany for engineering, etc - UK's dead in the water.

Best things recently (within a year or two) - got a pay rise and chucked some money in NS&I index-linked - should have maxed it out, though. I could cry at how low returns are now. Cue some bullsh!tter saying how he regularly gets 10% gains on the stockmarket.

VfM4meplse

melbury wrote: »

This is so awful, it has already been so low for so long and still no signs of it moving up:(

What are people to do?

Get a big fat offset mortgage and pay it off fast (doable within 6 years on multiples of 3*income). Once paid off, maximise pension payments and benefit from the tax relief. Cash in when property prices recover. Then p*ss off to a country that values it's savers.

Savers are being punished, it's about time we gave something back (karma).