BoE Hold Base Rate Against Expectations

DairyQueen

Retail savings rates have recently reduced yet again. As the market has likely priced-in a BoE base rate reduction that has failed to materialise, do others think that the recent rate cuts will reverse within weeks/months? Or will the banks do the usual... i.e. clean-up at savers' expense?

fun4everyone

Times are hard for savers who want to get a return on any non token amount of cash. That said, inflation is pretty low as well so it's not the worst possible situation. Given the poor rates around even on regular savers I have cut my emergency cash fund to an absolute bare minimum and invested everything. It's the only way to get ahead at the moment really.

Retail banks are complete trash and look to exploit people wherever they can by selling them crappy products they don't need. They wish all their customers had an IQ of about 12. I do not count on good savings rates any time soon although it will happen at some point in the future.

Brian65

fun4everyone wrote: »

Retail banks are complete trash and look to exploit people wherever they can by selling them crappy products they don't need..

Bit harsh. To be fair, when you think what it must cost them to run current accounts, for us to get free banking is great and interest on current accounts is fantastic.
And if you shop around retail savers can get better rates than bonds - and guaranteed to £85k. Its the only deal I can think of where the little guy gets a better deal than the big investor.
So they have to make up for these loss leading deals somewhere else.

Ixel

Well, given the potential uncertainty this year surrounding Brexit, other than the fact the UK knows that it's leaving the EU and entering a transition period tonight, I'm doing the same with my emergency fund. Any other surplus cash I'm pretty much drip feeding into VWRL over the next 15 months or so, to try and ride out some of the potential volatility. The pound currently appears to be gaining strength against the US dollar. While I'm not able to predict the future I'm guessing that it might gain a bit more strength, at least as long as we don't get no deal or a terrible deal from the EU by the end of the year. Who knows though, anything can honestly happen in the future to change perceptions.

bowlhead99

DairyQueen wrote: »

Retail savings rates have recently reduced yet again. As the market has likely priced-in a BoE base rate reduction that has failed to materialise, do others think that the recent rate cuts will reverse within weeks/months? Or will the banks do the usual... i.e. clean-up at savers' expense?

Just because the base rate reduction didn't happen, doesn't mean it won't happen some other month shortly. Going into January the financial markets were only pricing in a small chance of a rate reduction this month. Then after some more data and market activity and comments from some BoE members, the market was suddenly pricing in a greater than 60% chance. Then the expectation fell back again. In the end, there wasn't a reduction and sterling has rallied a bit. None of that flurry of activity was much to do with the general lowering of savings rates which has been going on for some time, since before this month even started.

Most bank rates are not tied explicitly to base rate in real time and savers are quite happy about that when it suits them. In March 2008, base rate was 5.5%. Over the following year there were a few cuts, and then suddenly it was down to 1% in Feb 2009 and 0.5% in March 2009.

So the base rate was nine tenths lower than it was a year earlier, even though it still cost a lot of money to run a bank. Did savers suddenly lose 90% of their savings interest income from one year to the next? No, the reductions were much more gradual than that. You might have found your 8% regular saver account started to pay only 5%.

The accusations of banks deliberately screwing their customers because banks are complete trash, is somewhat wide of the mark IMO. They do exist to make money, while customers' own greed causes customers to be disloyal and jump ship to anyone offering a slightly higher rate (even a temporary rate) or introductory offer. So banks focus on introductory offers as a land grab to attract customers back. If banks say their customers are complete trash because they are disloyal, the customers would be up in arms and say that's not their fault that there is no reward for loyalty, and it's the banks that are trash.

Nationwide tried a higher interest account linked to length of membership and members here still trashed the idea and said it wasn't the very best rate they could find in the whole of the market so they were going off to another financial institution. Then the next year they would go off to another one. And MSE advocates shopping around all the time and looking for deals. So banks have no chance really, as they can't possibly offer the best rate in the entire market on every product type as they would not be able to make the profits they need to create reserves for the future or a return to their shareholders.

Such is the nature of capitalism.

DairyQueen

bowlhead99 wrote: »

JThey do exist to make money, while customers' own greed causes customers to be disloyal and jump ship to anyone offering a slightly higher rate (even a temporary rate) or introductory offer. So banks focus on introductory offers as a land grab to attract customers back. If banks say their customers are complete trash because they are disloyal, the customers would be up in arms and say that's not their fault that there is no reward for loyalty, and it's the banks that are trash.
.

We are talking about the same banks that misbehaved so badly during the financial crisis? The same banks that have benefited so much from QE? The banks that don't need to offer anything like decent savings rates as a result? The banks that are hellbent on offering the lowest interest rate to mortgage borrowers, and pitiable rates to savers, courtesy of this massive taxpayer support? Those banks?

I recall very well the situation pre-2008. You didn't have to look far as a retail customer to find a savings rate 2%+ above inflation.

We don't pay to run current accounts. Amen to that. It's just about the only redeeming quality I can suggest about the (used-to-be) High Street banks. The challengers, to their credit, offer better deals.

Did I desert Nationwide's (so-called) loyalty saver account when they dropped the rate below that offered by many competitors? Yep, you betcha.

Loyalty? Who are you trying to kid?

Thrugelmir

DairyQueen wrote: »

We are talking about the same banks that misbehaved so badly during the financial crisis? The same banks that have benefited so much from QE? The banks that don't need to offer anything like decent savings rates as a result? The banks that are hellbent on offering the lowest interest rate to mortgage borrowers, and pitiable rates to savers, courtesy of this massive taxpayer support? Those banks?

Without QE the global financial system would have collapsed. The fact that all the major developed economies have rock bottom lending rates. Is an illustration of how weak the underlying situation really is. Cheap money is buoying share prices with share buy backs in profligation , with underlying profitability generally flat.

MarkCarnage

Blaming 'the banks' is an easy and cheap shot....some behaved reprehensibly, not all. Bottom line is that many, perhaps most people became addicted to consumerism and cheap credit and governments were happy to go along with that. Banks who didn't play the game saw restless shareholders criticise them and were often taken over as a result....

2008 was existentialist in that a wholesale collapse of payment systems would have occurred had action not being taken. The mistake was to keep it going too long. There will be a debt jubilee or similar at some point.

steampowered

Holding large sums of money in cash savings for long periods of time is frankly, a bit daft.

It should be invested in a balanced funds of stocks and shares.

Brian65

DairyQueen wrote: »

The banks that are hellbent on offering the lowest interest rate to mortgage borrowers, and pitiable rates to savers, courtesy of this massive taxpayer support?

Banks were better off with higher rates when they could have a bigger margin between saving and lending rates.
(Its the Government thats driven down rates through QE. Government intervention in the housing market is what keeps property prices up for the landowners. Socialism for the rich.)

Jonathan_Kelvin

DairyQueen wrote: »

Retail savings rates have recently reduced yet again. As the market has likely priced-in a BoE base rate reduction that has failed to materialise, do others think that the recent rate cuts will reverse within weeks/months? Or will the banks do the usual... i.e. clean-up at savers' expense?

It’s not against expectations, the market was split on this, with a slightly greater expectation of no change than of a cut.