Interest rates: What was it like back in the day?
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Not much benefit thinking what was there.
If interest rate goes up to 1990s level again, there will be riots in the streets.
It is not going to happen in short run.Happiness is buying an item and then not checking its price after a month to discover it was reduced further.0 -
In the late 70s annual RPI inflation reached 27% p.a. in the worst quarter (from memory - by all means check). Interest rates fell well short of that.
Neither a borrower nor a lender be but if in doubt be a borrower.Free the dunston one next time too.0 -
In the late 70s annual RPI inflation reached 27% p.a. in the worst quarter (from memory - by all means check).
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Thought I'd check out of curiosity and your memory didn't deceive you (within a reasonable tolerance!), it peaked at 26.9% in August 1975 according to the official ONS figures:
Yeh it was the same year were wage inflation peaked at 30%.0 -
..yes, interest rates are all relative to inflation. I would rather have 2% interest and 1.5% inflation than 8% interest and 15% inflation. Historically, (from what I can remember), there have been long periods where interest rates always exceeded inflation...just not for the last 10 years or so. We never bothered with investments as we could always get enough interest through normal savings accounts. (the last "big one" I remember was the Halifax saver paying 10%...we had to queue for that one.....happy days......"It's everybody's fault but mine...."0
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..yes, interest rates are all relative to inflation. I would rather have 2% interest and 1.5% inflation than 8% interest and 15% inflation. Historically, (from what I can remember), there have been long periods where interest rates always exceeded inflation...just not for the last 10 years or so. We never bothered with investments as we could always get enough interest through normal savings accounts. (the last "big one" I remember was the Halifax saver paying 10%...we had to queue for that one.....happy days....
Theyre not. How do you explain increased inflation recently? Or look at inflation about 2012 (sorry its 2011) where it spiked to about 12% (and sorry that was food inflation, not RPI) with more or less no fluctuation in interest rates. (inflation is generally now determined by the price of oil.)
I couldnt make my mind up on those two figures. I would need to know what wage inflation was looking like.
Whilst you might prefer interest rates of 2% and inflation of 1.5% the equivalent in my lifetime was about 3-4 years ago. Some couldve got that (i couldnt as relatively new buyer) but their real earnings growth (inflation v wages) was about 0.1% and for a good period it was negative all the way. At best you can call it stangnant since the 08 crash. ie Getting poorer at best no richer.
During the times of 8% interest and 15% inflation you were seeing real earning growth of about 2-3%. So whilst things where getting more and more expensive you wher earning more than the increases. Getting richer at worst no poorer.
On that basis youd be daft to prefer low interest rates and inflation?0 -
On a similar note, historically stock market investments paid lower income than bank deposits as you had more likelihood that you'd get capital growth and higher income in future.
When that changed and bank rates dropped some people said it would never last and dividends would have to drop. In the last 10 years that still hasn't happened and anyone who invested has also had some very tidy capital gains. You can still get over 3% income compared to the pittance from cash so it still makes me wonder why many people who want a higher level of income still don't try it.Remember the saying: if it looks too good to be true it almost certainly is.0 -
When I had my first mortgage in the 80's I remember I started paying more than half my take home pay to pay the mortgage. I had kittens the day interest rates spiked to 15%
But the advantage then was wages generally kept up with inflation, so after 3 years, my pay had gone up 30% but the mortgage stayed much the same and I could finally start actually living rather than existing.
Today you take out a mortgage and you are stuck with that payment with little inflation mechanism to reduce it.0 -
Yeh it was the same year were wage inflation peaked at 30%.0
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