Savings rates are lower than a year ago

snowqueen555

My 1 year bond is ending, which was 2%, and the rates now are even lower at around 1.75%. It does not offer much more than the best rated easy access accounts.

I am really struggling to beat inflation. Not only that, my salary has gone up 2% but my expenses have gone up 7% in one year, mainly due to renting and transport costs.

If this happens for a few years then my standard of living will be hit.

Alistair31

What’s the question ?

YorkshireBoy

Get a better paid job.
Make cutbacks/savings elsewhere.
Use high interest current accounts.
Use 5% regular savers (x3 taking £800 per month in total, drip fed from a circa 1.5% easy access savings account). That'll get you circa 3.25% on £9,600 per year.

Alexland

If you really want to feel the squeeze on your income and increase in your expenditure try having children

Thrugelmir

snowqueen555 wrote: »

If this happens for a few years then my standard of living will be hit.

Bailing out the banks has to be paid for.

RG2015

snowqueen555 wrote: »

My 1 year bond is ending, which was 2%, and the rates now are even lower at around 1.75%. It does not offer much more than the best rated easy access accounts.

I am really struggling to beat inflation. Not only that, my salary has gone up 2% but my expenses have gone up 7% in one year, mainly due to renting and transport costs.

If this happens for a few years then my standard of living will be hit.

I am in the same position with my Ford Money 1 year bond which was 2% a year ago and is now 1.75%. I will need to review my position.

However, I note that CPIH inflation is now 1.7% whereas it was 2.4% a year ago. I appreciate that your inflation is 7% but that is different for everyone. We all need to manage our finances according to our own circumstances.

You are correct that savings rates are falling but I believe that is driven by uncertainty about the future. Financial forecasting is based on historical experience but we are currently experiencing some of the most unique events for many years. Brexit, China, Iran/Saudi (oil) to name but a few.

Whilst I am not a pessimist, I fear that a drop of 0.25% on my savings rates may be the least of my financial problems.

Thrugelmir

RG2015 wrote: »

You are correct that savings rates are falling but I believe that is driven by uncertainty about the future.

Savings rates are driven by the demand for deposits by lenders.

RG2015

Thrugelmir wrote: »

Savings rates are driven by the demand for deposits by lenders.

I would not disagree with you but surely it is not as simple as this. Ford Money offering a one year bond at 2% a year ago and 1.75% now is not solely down to their cash requirements.

Thrugelmir

RG2015 wrote: »

I would not disagree with you but surely it is not as simple as this. Ford Money offering a one year bond at 2% a year ago and 1.75% now is not solely down to their cash requirements.

Ford Money will be raising money to fund car lease and purchase agreements. Likewise they won't offer a higher rate than they need to. I've a number of fixed term deposits with FM from when they were offering market leading rates. Soon disappeared. Tesco Bank were similar. Once they announced withdrawl from the mortgage market . Fixed term rates dropped over 0.5%.

Flobberchops

Yes, savings rates have again dipped across the board - seemingly "Brexit Uncertainty" is the new "dog ate my homework", as it's an excuse wheeled out by banks, businesses, and indeed governments to explain why they can't get stuff done.

If you want a better return on your money you may have to look outside of cash. If this time last year you had bought gold instead of that 2% bond, your shiny metals would have increased in value by 33%. Silver, 32%. That's not a recommendation to buy now when prices are high, but an illustration of how diversifying can hedge against crummy cash and bond returns.

Thinking of more conventional investments, there are plenty of funds and individual stocks that are outperforming inflation. Forum favourite VLS80 grew 7.38% over the last year. There are also several FTSE100 dividend stocks paying in excess of 5% income.

Lower your outgoings, make sure you're maximising any cashback, rewards, benefits or rebates you may be eligible for, and then consider accepting a degree of risk or volatility if you want your savings to beat inflation. (Do your research, capital is at risk, etc etc)

Uxb1

snowqueen555 wrote: »

If this happens for a few years then my standard of living will be hit.

you should have been around in the 1970's - like what I was
Inflation peaked at 25%
and the stock market dropped by just over 70% (The index was then the FT30) from its peak in 1972 just in case you were thinking that those with investments could ride out the chaos.
On top of this mayhem there was a tax called investment income surcharge. This was an additional 15% tax on top of tax already taken for those stupid enough to actually have unearned income from investments and savings.