Should there be a legal minimum interest rate for fixed rate accounts, for NS&I at least?

EdGasketTheSecond

coastline said:

What is really remarkable is that what we thought was a short-term change in monetary policy to deal with the financial crisis seems to have turned into a new normal. Record low interest rates never went away. The QE programme was not unwound, it was expanded.

Milton Friedman said 'There is nothing so permenant as a temporary government program'; very true in the case of QE and artificially low interest rates. Same has been true when Nixon 'temporarily' took the dollar off the gold standard.

Sailtheworld

cricidmuslibale said:

coastline said:

What is really remarkable is that what we thought was a short-term change in monetary policy to deal with the financial crisis seems to have turned into a new normal. Record low interest rates never went away. The QE programme was not unwound, it was expanded. At the same time, the interest payable on government debt continued to fall.
Ultra-low interest rates have huge consequences for the country and its citizens - Institute For Fiscal Studies - IFS

Thank you! This is a really good article which basically underlines, in a much more erudite way that I'm capable of, the points I've been trying to make and adds many more pertinent observations as well!

It says there's a willingness to lend record amounts of money at record low interest rates. It doesn't support your point that there's an inverse relationship between interest rate and saving rate.

Another_Saver

cricidmuslibale said:

"There is no evidence that higher interest rates make more people more likely to save."  Really??? I find this very hard to believe tbh. It certainly contradicts my experience, that of many people I know who only tend to save when they think it's worth their while doing so and everything I've ever read on this subject including what is written in the article very kindly provided by coastline above.

Well you know what they say about facts and beliefs. It seems that even after I have already explained what is going on with rates, the debate that "it's the government", is still ongoing...

naedanger

Another_Saver said:

cricidmuslibale said:

"There is no evidence that higher interest rates make more people more likely to save."  Really??? I find this very hard to believe tbh. It certainly contradicts my experience, that of many people I know who only tend to save when they think it's worth their while doing so and everything I've ever read on this subject including what is written in the article very kindly provided by coastline above.

Well you know what they say about facts and beliefs. It seems that even after I have already explained what is going on with rates, the debate that "it's the government", is still ongoing...

But as you have rightly said the government does influence rates. Therefore it is not really surprising people debate that "it's the government".

And the government could easily offer a guaranteed minimum rate (especially on capped amounts of investment) on national savings and therefore it is quite legitimate to debate whether they should do so. (My own view is that they shouldn't as I believe the costs of doing so would outweigh the benefits.)

Another_Saver

naedanger said:

Another_Saver said:

cricidmuslibale said:

"There is no evidence that higher interest rates make more people more likely to save."  Really??? I find this very hard to believe tbh. It certainly contradicts my experience, that of many people I know who only tend to save when they think it's worth their while doing so and everything I've ever read on this subject including what is written in the article very kindly provided by coastline above.

Well you know what they say about facts and beliefs. It seems that even after I have already explained what is going on with rates, the debate that "it's the government", is still ongoing...

But as you have rightly said the government does influence rates. Therefore it is not really surprising people debate that "it's the government".

And the government could easily offer a guaranteed minimum rate (especially on capped amounts of investment) on national savings and therefore it is quite legitimate to debate whether they should do so. (My own view is that they shouldn't as I believe the costs of doing so would outweigh the benefits.)

What the OP isn't getting Is that rates follow savings, savings don't follow rates. The OP thinks that higher rates make people save - they don't. Higher rates are only possible when the savings supply shrinks. Regardless of their beliefs, I can find no evidence or credible theory to support their assertion.
Savings can move around to competitively find the best rates just as borrowers do, but it is still a singular supply and demand system with a pool of supply and a pool of credit opportunities.
Premium bonds already offer a competitive, but not guaranteed minimum rate upto a fixed amount.
Government manipulation rarely works and always has consequences, from Thatcher's stupidly high rates to counter inflation, to the wibble wobbles of the post dot com years that helped accentuate the GFC.

EdGasketTheSecond

No the governments are in control at the moment 'printing' currency and artificially holding rates at near zero. Also manipulating the yield curve on bonds. Rates at the moment have nothing to do with savers and borrowers, only the central banks.

Actually gov'ts can't afford to let interest rates find their natural level as anything above 2% now would crash the economy and bankrupt the gov'ts who could not then afford their debt. They will inflate their way out of this, well try to, and it will be regular savers who lose out.

phillw

cricidmuslibale said:
Mortgage holders have, to be fair, been prioritised over savers for quite some time now. Hence we now have ultra low mortgage rates historically speaking. 

I'm not sure that mortgage holders are the target for the low interest rates.

phillw

Another_Saver said:
Savings can move around to competitively find the best rates just as borrowers do,

It's generally easier for savers to move around. If you keep applying for credit everywhere quickly you'll find yourself being turned down. You can open as many savings accounts as you want.

phillw

naedanger said:
But as you have rightly said the government does influence rates. Therefore it is not really surprising people debate that "it's the government".

QE is to kickstart the economy, if they then guaranteed a savings interest rate then it would not have the effect QE is supposed to have.

Rollinghome

Thrugelmir said:Reward should come from taking a risk. 

If you are suggesting we should all get down to Kempton Park then I think you should reconsider.