interest rate cuts could be on their way

Generali

free4440273 wrote: »

...try actually getting seven per cent (care of BofE).

You should get a nice steady 7% (inc capital gains) from buying stuff like fags'n'booze'n'utilities. Add some bonds and some more esoteric stuff into the mix and there's no reason not to get 7% pa over 40 years.

We're straying dangerously into 'Where are all the customers' yachts' territory now though.

free4440273

...it's the fact that one cannot make even reasonable gains from (risk free) savings accounts that worries me (courtesy of the BofE). 'No Risk, No Reward'. Try telling that to a pensioner who just wants a steady income (It did not used to be the case):

Originally Posted by free4440273
As I've said before on this forum: cutting rates is not the solution; there has to be an equilibrium, otherwise we just keep on discouraging saving (via artificially low interest rates) and discouraging prudence (people just keep on borrowing).

michaels

..surely interest rates are what keep savings and investment in equilibrium...if long tern interest rates are lower than in the 70s and 80s that is because there ar elotsw of savings out their looking for a home...and indeed there are, just not 'our' savings but instead savings in the far east and the petro economies

The bit I find counterintuitive is that those countries with an aging population ar enot those who are saving the most.

wolvoman

!!!!!!? wrote: »

I don't think consumers even understand the notion of paying down debt quickly - the modern trend is just to borrow more and more whilst making minimum payments .

IMO once the property market starts falling (as it is now agreed by all will happen) it'll precipitate a wider recession with jobs in finance and retail sharply hit. This will in turn lead to bigger drops in property as no-one feels like borrowing lots of money to buy a house in a recession.

At this point, cutting interest rates will do little to shore up house prices. It might help businesses and those in debt but the resulting inflation isn't going to help anyone.


In short - we're doomed

But if house prices fall, jobs are lost and a recession begins then these 3 things alone will have a huge knock-on effect on reducing product and service demand which will reduce inflation.

Of course oil prises and a possible fall in the pound have an inflationary effect, but are these strong enough to outweigh the deflationary factors you mention.


Right now I can't actually see that a 0.25 or 0.50 percent cut in IRs will have much impact on inflation at all (because it won't have a huge effect on consumer sentiment). BUT IR cuts of that size might just be enough to avert a major slowdown or recession, and most importantly of all might avert any widespread reposessions in the UK.

granville_2

santashelper wrote: »

heard a report today that there may soon be a cut in interest rates

brilliant... so people can gorge on more cheap debt (if they can get it!)

hasn't anybody noticed inflation is creeping back? does anybody believe the CPI measure?

is the BOE / government's real intention to inflate our way out of this debt mess?

what about those of us who choose to save and not borrow?

so many questions... :rolleyes:

free4440273

^^Some of them answered:

free4440273 wrote: »

...it's the fact that one cannot make even reasonable gains from (risk free) savings accounts that worries me (courtesy of the BofE). 'No Risk, No Reward'. Try telling that to a pensioner who just wants a steady income (It did not used to be the case):

Originally Posted by free4440273
As I've said before on this forum: cutting rates is not the solution; there has to be an equilibrium, otherwise we just keep on discouraging saving (via artificially low interest rates) and discouraging prudence (people just keep on borrowing).

$$$_12

Of course there's no guarantee that any cuts in the Bank of England rate would be passed onto mortgage payers...

http://business.timesonline.co.uk/tol/business/money/property_and_mortgages/article2886536.ece

ashm1

BOE will cut rates in 2008 and the banks will continue to re-price risk.

free4440273

$$$ wrote: »

Of course there's no guarantee that any cuts in the Bank of England rate would be passed onto mortgage payers...

http://business.timesonline.co.uk/tol/business/money/property_and_mortgages/article2886536.ece

Agreed. But it's Savers who i worry about

santashelper_2

dannyboycey wrote: »

I remember once reading an interview with Sir Richard Branson. They asked if there was a secret to becoming rich. He said something along the lines of "Yes, make sure you spend less than you earn each month". So simple, but it appears that very few people are able to follow that advice.

i tried this them the goverment kept increasing things like council tax, etc the more i earnt the more they took the saying is true that the rich get ricer and the poor get poorer what hope do we have, my husband is restricted in his business the more staff he has the more tax he pays so he cant increase his staffing levels its like trying to win a loosing battle and they wonder why so many people in this country suffer with depression