Interest on savings seems to be disappearing altogether - why and what are the future implications?

ColdIron

steampowered said:

Takedap said:

The high inflation of the 70s & 80s was actually a good thing for people holding mortgages.   You could take out a large loan knowing that although it might be a struggle in the early days, it soon became much easier due to relatively large yearly pay increases.  Nowadays, repayments start high & continue to be a high percentage of your wages forever.

Lots of people on here playing the fiddle about how hard it was to pay their mortgage back in the 80s when interest rates were 15%. Conveniently forgetting that high inflation and high pay rises paid off much of the mortgage for them. A few years of that and most of the principal of your debt has inflated away.

Not forgetting 5 years of negative equities between 1991 and 1996. Squeaky bum time if you had taken out a mortgage as I had in late 1989. It all turned out fine in the end but we weren't to know that at the time. It was very a concerning period for many, paying out an increasing amount of money for a depreciating asset

itwasntme001

ColdIron said:

steampowered said:

Takedap said:

The high inflation of the 70s & 80s was actually a good thing for people holding mortgages.   You could take out a large loan knowing that although it might be a struggle in the early days, it soon became much easier due to relatively large yearly pay increases.  Nowadays, repayments start high & continue to be a high percentage of your wages forever.

Lots of people on here playing the fiddle about how hard it was to pay their mortgage back in the 80s when interest rates were 15%. Conveniently forgetting that high inflation and high pay rises paid off much of the mortgage for them. A few years of that and most of the principal of your debt has inflated away.

Not forgetting 5 years of negative equities between 1991 and 1996. Squeaky bum time if you had taken out a mortgage as I had in late 1989. It all turned out fine in the end but we weren't to know that at the time. It was very a concerning period for many, paying out an increasing amount of money for a depreciating asset

But how many actually were in negative equity?  Most home owners obviously would have bought at least 10 years prior to the start of the correction so, along with paying down the capital via their mortgage repayments, would have unlikely have been in negative equity.  Sure, falling house prices are never nice for owners, but hardly devastating for most.

eskbanker

Stenwold said:

VXman said:

Stenwold said:

1. Consumerism drives growth, which increases employment and quality of life - are you saying this is a bad thing?
2. Do you really mean the youth of today? I don't know anyone who spends £800 on a phone and £200 on trainers, let alone anyone young

1. Yes it is a bad thing. It is unsustainable. One day it will have to end or the world will.
2, £800 for an i phone is fairly mid priced. £1100 is possible. Not necessary of course. My Xiaomi phone does everything an iphone does for £120. (Well, everything I can think of and more than I need to use)

I'm not going to disagree with you there, however until we find a way for it to end without complete financial collapse, consumerism is here to stay for the good of the economy.

Yes, £800 is nowhere near the top end of phone prices, but the point I was making (or trying to) was that younger people don't spend that much on a phone - you can get good phones for relatively cheap monthly payments nowadays. It's not true to suggest that the younger generation aren't financially sound because of their spending habits (which was the original point I was replying to).

If your point is that some younger people that you know don't spend that much on a phone then fair enough, but otherwise it's a completely untenable generalisation!

itwasntme001

VXman said:

Stenwold said:

1. Consumerism drives growth, which increases employment and quality of life - are you saying this is a bad thing?
2. Do you really mean the youth of today? I don't know anyone who spends £800 on a phone and £200 on trainers, let alone anyone young

1. Yes it is a bad thing. It is unsustainable. One day it will have to end or the world will.
2, £800 for an i phone is fairly mid priced. £1100 is possible. Not necessary of course. My Xiaomi phone does everything an iphone does for £120. (Well, everything I can think of and more than I need to use)

Consumerism is only unsustainable if driven by excessive debt and by that I mean too much debt taken out relative to future earnings to pay off this debt.  Consumerism in itself is not a bad thing, in fatc it is a good thing as it creates a demand for goods and services, workers get jobs, stock owners get wealthier and the government takes taxes.

Until there is any evidence that exccess debt has driven consumerism to date, I do not think its fair to say it is unsustainable.  I myself have never paid more than £300 for an iPhone as I always bought 2nd hand.  I still use an iPhone 6.  There are many young people like me.

max...

I think in most of our saving history (ie 80's to 2010) interest rates have still enjoyed a healthy gain over inflation, sadly those days are long gone.  It's swings and roundabouts like most finances.  We were lucky enough to buy a house circa '96, circumstances changed and we sold at 3x ten years later.  Moved in with folks for a few years with proceeds safely sitting in bank at 5-10% fixed IIRC.  Then timed buying a house again just right.  But for the last decade and our foreseeable future into retirement any easy/safe cash return above 1% (ie an effective loss of 2+% a year) is a dream.  So, you have to take risks and do what you can to keep hold of and grow your hard earned - life is swings and roundabouts.  But being young now - hmmm.