Why aren't interest rates going up?

melbury

In the past as soon as inflation started rising, so did interest rates.

Savers have had such a bad time for years now, surely they will have to start increasing base rate soon, won't they?

AnotherJoe

No they won't.

Brexit is going to depress UK interest rates for long time. Doesn't mean they won't go up but not at as much as if we were in the EU.

masonic

For most of 2011, we had CPI running at >4% and base rate of 0.5%. There are no simple rules I'm afraid.

dunstonh

Interest rates are one of a few different methods use to control money supply.

Inflation in this case is because of a specific event. It is not because of an underlying ongoing event that needs the economy to be cooled.

norm_

If interest rates rose the mountain of debt the economy and housing market is built on would soon start to crumble.

The BoE are just building one giant ponzi scheme, or trying to hold onto anyway.

Freecall

dunstonh wrote: »

Inflation in this case is because of a specific event. It is not because of an underlying ongoing event that needs the economy to be cooled.

Absolutely correct, there is currently no evidence that the economy over-heating.

In fact, the reverse is true, the BoE has to do all it can to maintain the money supply in order to stimulate investment. As a country, for better or worse, we have collectively decided that barriers to trade are a price worth paying for not participating in the EU.

To compete therefore we must insure that the pound remains weak. Unfortunately this will also mean higher prices and low interest rates in the years that lay ahead but if we collectively want out of the EU then we have to accept the cost.

jimjames

melbury wrote: »

Savers have had such a bad time for years now, surely they will have to start increasing base rate soon, won't they?

You can get over 3% on £30k or so. I don't think savers are having a very bad time of it especially when that's way above inflation

melbury

jimjames wrote: »

You can get over 3% on £30k or so. I don't think savers are having a very bad time of it especially when that's way above inflation

I haven't been able to find any accounts paying that amount. Best I could get recently was 1.32% on £35K with Masthaven.

I remember the days of being able to get 10% on savings and being quite upset when the best I could find was 7.75% after they started falling. Today's rates are pathetic.

YorkshireBoy

melbury wrote: »

I haven't been able to find any accounts paying that amount. Best I could get recently was 1.32% on £35K with Masthaven.

You're looking at savings accounts (understandably), but the best rates these days on that sum of money (and slightly more) will be found by using current accounts and regular savers. A bit more work, yes, but worth it for 12 x BOE base rate and 1.5 x CPI?

I remember the days of being able to get 10% on savings and being quite upset when the best I could find was 7.75% after they started falling. Today's rates are pathetic.

What was the BOE base rate and CPI when you were enjoying 10%/7.75% AER on your savings?

Pincher

http://www.moneysavingexpert.com/news/mortgages/2017/02/five-year-mortgage-fixes-at-an-all-time-low

"Last week Tesco Bank launched a record low five-year rate at 1.78% with a £995 fee for those borrowing up to 60% of their home's value.
For borrowers with a similarly hefty chunk of equity in their home, HSBC is offering 1.79%, Metro Bank 1.94% and Skipton 1.82%."


Not that they will lend it to me, but if I can borrow £600k at 1.78%, interest only, That is £10,680 interest a year. I buy roughly 900,000 shares of LLOY at 66.85p.
Assuming 2.75p dividend per share, that's £24,750 before tax. Unlike stupid interest, at 20% tax, I pay 7.5% for dividend.

So, stoozing profit per year £12,214 = 24,750 - £10,680 - £1,856

Over five years, that's £61,070 = £12,214 x 5 stoozing profit.

Potentially, Lloyds share price can go up as well. £600k becomes £1.2million, pay back £600k mortgage, clear £600k, pay 20% CGT £120k, make £480k.



Ask not what low interest rate can do TO you,
Ask what you can do with a low interest rate.

JFK Pincher for President:j

jimjames

melbury wrote: »

I haven't been able to find any accounts paying that amount.

You've been on this forum a very long time, have you not spotted any of the multitude of posts about high interest accounts? 5% savings loophole? Definitely worth taking a look if you want to earn better rates.