Hooray for savings rates cuts

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Legacy_user
Legacy_user Posts: 0 Newbie
in Savings & investments
I figure you wouldn't need to hold many shares in a bank to benefit more than you lose from any cuts they make to current account rewards and savings interest

Question is how much would you need invested?

How much would the banks dividends improve for these rate cuts?

Some of you probably would be net beneficiaries ;)
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  • Biggles
    Biggles Posts: 8,209 Forumite
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    It doesn't work like that.

    To start with, they're not cutting interest rates to make more profit, they're cutting them to avoid making a loss.

    And, if they did end up making more profit, they might increase their dividend, paying you more income, or maybe their share price would just increase, providing you with a capital gain.

    But they might well make a loss and cut their dividend, making you a loser on both counts.

    At least you can't lose money in a bank account. Usually.
  • System
    System Posts: 178,094 Community Admin
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    I suppose I just mean the shares are better than the otherwise would have been for that action being taken

    How invested would someone need to be that that improvement in the shares compensates for the loss as a customer?
  • bowlhead99
    bowlhead99 Posts: 12,295 Forumite
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    MatthewAinsworth wrote: »
    I suppose I just mean the shares are better than the otherwise would have been for that action being taken

    How invested would someone need to be that that improvement in the shares compensates for the loss as a customer?

    Well if they didn't cut their offered interest rates when base rates fell, while their workforce still wanted paying the same salary and their buildings and systems and infrastructure costs still existed, and the amounts they could charge on mortgages and loans had to fall in line with the competition... then they would be out of business and the shares would be worth 0p. And the shares are about 50p, which is infinity times 0p.

    So, while you may "suffer" as a customer who gets fewer pounds of interest income (maybe a percent worse off after a year), the investor has shares which are infinity percent more valuable than if Lloyds kept paying high rates and went out of business.

    If you are looking for a more accurate answer to your dumb hypothetical question, why not run the numbers and tell us what you think the answer is?
  • badger09
    badger09 Posts: 11,211 Forumite
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    bowlhead99 wrote: »
    If you are looking for a more accurate answer to your dumb hypothetical question, why not run the numbers and tell us what you think the answer is?

    :hello: Please sir, is the answer 42?
  • bowlhead99
    bowlhead99 Posts: 12,295 Forumite
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    What do you get if you multiply six by nine?
  • System
    System Posts: 178,094 Community Admin
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    Assuming it didn't mean completely going out of business? I just want to know when I can feel good about these events

    I don't know how much they plan on saving or what their current profitability is
  • coyrls
    coyrls Posts: 2,432 Forumite
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    MatthewAinsworth wrote: »
    Assuming it didn't mean completely going out of business? I just want to know when I can feel good about these events

    I don't know how much they plan on saving or what their current profitability is

    Just keep taking the happy pills if feeling good about these events is what you want because you're going to need them, as this is just the start. Now we have low interest rates and low inflation but low interest rates and high inflation is around the corner. As a confirmed Brexitier, I guess you think this is part of the price that is worth paying anyway.
  • System
    System Posts: 178,094 Community Admin
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    Well hypothetically if you had shares with improved profitability over before that'd be a good thing - I don't relate those market conditions to brexit, they could've made those cuts before and rates have been low for years

    We do really need some inflation, then wages might increase eventually after years of stagnation under the previously strong pound, the weaker pound will allow our wages to compete with foreign workers without lowering our wages, it'll bring jobs here as we'll buy more locally and export more to the world. Maybe if inflation creeps in the BoE will finally see fit to raise interest rates, then we might begin to see more controlled house price growth too
  • coyrls
    coyrls Posts: 2,432 Forumite
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    MatthewAinsworth wrote: »
    Well hypothetically if you had shares with improved profitability over before that'd be a good thing - I don't relate those market conditions to brexit, they could've made those cuts before and rates have been low for years

    We do really need some inflation, then wages might increase eventually after years of stagnation under the previously strong pound, the weaker pound will allow our wages to compete with foreign workers without lowering our wages, it'll bring jobs here as we'll buy more locally and export more to the world. Maybe if inflation creeps in the BoE will finally see fit to raise interest rates, then we might begin to see more controlled house price growth too

    What a load of nonsense.
  • Gadfium
    Gadfium Posts: 763 Forumite
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    coyrls wrote: »
    . Now we have low interest rates and low inflation but low interest rates and high inflation is around the corner. .

    Low interest rates and high inflation will just add to the complete and utter clusterf*ck that the UK has created for itself.
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