MSE News: 0.5% base rate may last another three years

Former_MSE_Helen · 8 March 2012 at 10:54AM

This is the discussion thread for the following MSE News Story:

"Experts think rates will remain at 0.5% until the end of next year and possibly for as long as three more years ..."

Read the full story:
0.5% base rate may last another three years

carrieh · 8 March 2012 at 11:06AM

I read a quote from Mervyn King a short while ago which stated that he wanted people to spend more money to get it flowing in the economy, and he felt that if savings rates remained low, it encouraged people to spend. Well I'm sorry, that's certainly way off the mark where I'm concerned and very bad psychology. I don't have any other income other than the interest on my savings, so when savings rates are low, I have less money to spend. In fact I am currently spending as little of it as possible, as I am very well aware that my savings are already losing money in real terms due to inflation. If the savings interest rate went up to around 6% again, I would have more money to spend, I would feel richer, and would therefore spend more. I don't have a mortgage any longer, so the savings rates are extra important to me personally.

talexuser · 8 March 2012 at 11:26AM

I think they are going to keep the interest rates at the present levels to the point when house prices have stagnated to their true value without having a crash and large amounts of negative equity.

Whether this is a good strategy to save pain for the relatively few by inflicting pain on the many is debatable, on the basis that the total loss to the country in terms of recession is better spread out bit by bit over a decade, rather than getting it over with in a couple of years and back to growth.

The "spend" plea is a pretty pathetic attempt to stimulate growth.

m1lor · 8 March 2012 at 3:13PM

The "Disconnect" between the Bank of England base rate and the rate that everybody else pays to borrow - unless they are on a base rate tracker mortgage - has recently become more pronounced.

For most people there is little or no connection between a Base Rate and what people actually pay in the real world 4% to some unmentionable rate when borrowing power is "impaired"

Until the last week I was convinced that mortgage rates were likely to remain flat for some considerable period of time.

However, with the recent marked "upswing" in actually-charged mortgage rates I am now beginning to have to "re-think" that assumption.

On Daily Politics today, it was said that the "mortgage bombshell" is now on its way to being released.

I thought it was always inevitable that mortgage interest rates would revert to their long-term trend, but until recently I thought that people might be getting a longer respite.

evenasus · 8 March 2012 at 4:15PM

carrieh wrote: »

I read a quote from Mervyn King a short while ago which stated that he wanted people to spend more money to get it flowing in the economy, and he felt that if savings rates remained low, it encouraged people to spend.

Salaries frozen or even reduced - Fuel/Gas/Electricity/Water/Food prices up.
He needs to view the perspective from and ordinary persons position.

Just where does he think the people are going to get this money to spend?

carrieh wrote: »

Well I'm sorry, that's certainly way off the mark where I'm concerned and very bad psychology.

I'm in the fortunate position of not having to worry about money but I'm of the same opinion.

Blackdog · 8 March 2012 at 6:17PM

As we now know from recent mortgage rate rises the fact that bank rates are 0.5% doesn't guarantee anything for retail borrowers/savers. There have been some short term rises in interest rates for savers (Close Brothers, Shawbrook etc) which get withdrawn once they meet their targets for funds. I agree with those that think that this trend will continue. Bank rates will stay low but savings rates will rise slowly to attract more funds. The problem with these short term offers is always a question of timing, if you have money tied up in fixed term accounts it never seems to mature at a point in time when there is a good rate of interest available. I also agree with those that say people will continue to curb their spending in these uncertain economic times, having money in the bank is not going to encourage people to spend even if interest rates are low. Holding on to the money is the nations security blanket!

jimjames · 8 March 2012 at 10:55PM

From a personal, selfish point of view another 3 years of 0.5% would be great. We're on a tracker and are now able to pay down a lot more capital with rates this low.

Obviously as a saver the situation isn't so good but we have very little cash savings anyway. Interestingly the article says savings rates dropped from 6.52% in 2008 to 2.78% which actually compared pretty well with a 5% drop in the base rate only giving a 3.74% drop in savings rates

Pincher · 8 March 2012 at 10:56PM

I'm saving £4,000 on interest a year.
Three more years means a new car.
Cheers Mervyn. :beer:

Itismehonest · 8 March 2012 at 11:23PM

Well, by the end of another 3 years I think there will be a lot of older, mortgage free, fixed income people having to totally rely on the state.

During the recession of the early 90s it was completely different. Interest rates were high & older people were out spending money, taking extra holidays & short breaks (many in this country) & generally helping to bolster the economy. Most can't do that this time.

hermante · 9 March 2012 at 12:58AM

Itismehonest wrote: »

Well, by the end of another 3 years I think there will be a lot of older, mortgage free, fixed income people having to totally rely on the state.

During the recession of the early 90s it was completely different. Interest rates were high & older people were out spending money, taking extra holidays & short breaks (many in this country) & generally helping to bolster the economy. Most can't do that this time.

Only because they like living in a big house. Nobody should be forced to move house, but if pensioners decided to cash in on their house price rises they could easily afford to spend lots.

Butterfly_Brain · 9 March 2012 at 12:03PM

hermante wrote: »

Only because they like living in a big house. Nobody should be forced to move house, but if pensioners decided to cash in on their house price rises they could easily afford to spend lots.

Easy to say that, but the housing market is flat and first time buyers can't afford the bigger houses, you also have to factor in that older people who have saved all their lives to buy a home are usually unable to afford the associated fees, because there is no spare cash due to the fact that the banks have been paying such low interest rates on savings..... CATCH 22
The banks are a law unto themselves, they are squeezing as much as they can out of people who just haven't got the funds, the savings interest rate has not increased, but the mortgage rate has......... that is blatant profiteering :mad:

MSE News: 0.5% base rate may last another three years

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