BOE raises Base rate to 5.5%

nilrem_2

Dunscrimpin wrote: »

Hi,

Still to take out this year's entitlement re. Mini cash ISA.
Do I wait for new rates to emerge, and if so, when is this likely to occur, please, or should I plump for best fixed or variable deal straight away ?

Any advice much appreciated.

D

I would go for NS & I direct mini cash ISA, the rates are good ATM and they have a good record on increasing rates quickly when the BOE rate changes, it's possible to keep hanging on for that better rate that is just 'around the corner' if you wait a while, but the problem with that is that any interest you gain by waiting is often used up whilst you are looking for that elusive top rate!

Steve_xx

GCH888 wrote: »

Or go with something like the NS&I Direct ISA which guarantees to stay 0.55% above the base rate until at least 5 April 2008. Therefore you should still benefit from any rate increases which come later in the year.

But of course you may not benefit quite so well should rates fall sharply!

Dunscrimpin

Thanks for your kind replies.

Much appreciated.

D.

bristolleedsfan

nilrem wrote: »

I am happy but would have been happier with a 1% rise!

People who complain about the rate being high should visit the BOE site and just look at what the rate has been in the past, Have a look at 1989 for starters , in Oct it was over 14% and that is not the highest it has been either!

IMHO people borrowing cash today don't realise how low the rates are even with today's increase!

absolutely correct although it should be remembered that tax relief used to be paid on morgage payments, basic rate of tax was something like 30% at one time

Gorgeous_George

bristolleedsfan wrote: »

absolutely correct although it should be remembered that tax relief used to be paid on morgage payments, basic rate of tax was something like 30% at one time

...but MIRAS (Mortgage Income Relief At Source) was limited to £30K and whilst it was initially at the 30%-ish level, the Tories dropped it to, IIRC, just 10% before it was finally removed altogether.

Back to the topic, IR rises signal BAD news for everyone - including savers. The only reason IRs have risen is to combat inflation. Inflation erodes your savings. As for borrowers, bank loans are usually at fixed rates, so current loans will not be affected. Credit cards are unlikely to be affected by a 0.25% rise. Mortgages will, of course, go up but many people are one fixed rates and will only be affected if rates are high when their fixes end.

Personally, my finances are fairly neutral. I may move some money that I have in fixed rate ISAs (6%) into my off-set savings account but it's marginal.



GG

bristolleedsfan

Gorgeous_George wrote: »

...but MIRAS (Mortgage Income Relief At Source) was limited to £30K and whilst it was initially at the 30%-ish level, the Tories dropped it to, IIRC, just 10% before it was finally removed altogether.

GG

absolutely correct with the addition that until mid 1988-89 ish unmarried couples received 2 lots of miras tax relief so combined received tax relief up to 60000, it was the tories behaviour in not just doing away with double tax relief but giving a delay to when the abolition would take effect that triggered the boom/bust in the housing market, all i was saying is that a lot of people werent paying the 14% rates quoted cos they were getting near on 1/4 reduction in tax relief, and leaving aside the few boom months of 1988 house prices were a lot lower than today

codetown

Gorgeous_George wrote: »

Back to the topic, IR rises signal BAD news for everyone - including savers. The only reason IRs have risen is to combat inflation. Inflation erodes your savings. As for borrowers, bank loans are usually at fixed rates, so current loans will not be affected. Credit cards are unlikely to be affected by a 0.25% rise. Mortgages will, of course, go up but many people are one fixed rates and will only be affected if rates are high when their fixes end.

I disagree on your vision. Yes inflation is not good, but it is already here, so you cannot connect the rate rise with it. It is like confusing an ilness with the drugs you need to take afterwards to get better. The rate rise is the medicine, an help to you!
The rate rise is just an a-posteriori reaction to attempt and improve things and is certainly positive to savers, as their money is considered worth more and allows better returns with the same effort.

As far as borrowers (mortgage mostly), they will certainly loose out as most are not on fixed rates and their costs will increase very soon.

Banks will generlly be better off as they will be able to recover more money from their past loans, even if probably this effect will be compensated by a lower number of new applicants.

Gorgeous_George

I don't see how having a higher interest rate on savings is particularly beneficial if the money is worth less because of inflation (although I get your point).

Higher interest rates are themselves inflationary. Higher taxes would be a better way to curb spending.



GG

Paul_Herring

Gorgeous_George wrote: »

Higher interest rates are themselves inflationary

Only if the majority of the population were saving money and spending the interest. Exhibit one against this - witness the proliferaion of IVA adverts (especially on daytime TV).

Higher taxes would be a better way to curb spending.

You may now remove your tongue from your cheek

ManAtHome

codetown wrote: »

just an a-posteriori reaction

Thanks - have been trying to remember the Latin for "wringing ones hands whilst sitting on them...

Gorgeous_George wrote: »

Higher taxes would be a better way to curb spending.

Yes, especially if they were property taxes - would also help to curb real inflation (but no impact on Cheese and Plasma Inflation).