Brexit and savers interest rates

Brexit and savers interest rates

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Discussion

crankedup

Original Poster:

25,764 posts

242 months

Sunday 22nd May 2016
quotequote all
Mortgage payers have had a good number of years of record low level interest rates. Savers have obviously been paying for this with record levels of low interest payments, some verging on negative rates and certainly negative when the inflation rate is factored in.
For the most part it is older people 60 + years on that have been hit, and yet younger people suggest that pensioners should be contributing more in terms of Government deficit reduction penalties.
What happens o this situation post our exit of the EU

otherman

2,190 posts

164 months

Sunday 22nd May 2016
quotequote all
Like all the other brexit questions, no-one knows the answer. What impact will brexit have on the crispiness of bacon?

crankedup

Original Poster:

25,764 posts

242 months

Sunday 22nd May 2016
quotequote all
otherman said:
Like all the other brexit questions, no-one knows the answer. What impact will brexit have on the crispiness of bacon?
Very true, interested in other people's take though. As for bacon, English is best smile

FourWheelDrift

88,382 posts

283 months

Sunday 22nd May 2016
quotequote all
otherman said:
What impact will brexit have on the crispiness of bacon?
I think Cameron said leaving the EU will result in limp bacon.

chow pan toon

12,356 posts

236 months

Sunday 22nd May 2016
quotequote all
FourWheelDrift said:
otherman said:
What impact will brexit have on the crispiness of bacon?
I think Cameron said leaving the EU will result in limp bacon.
I would imagine that if he were asked he would suggest that savings rates would hit -5% whilst mortgages hit 20%, not that it would matter because we'd all be unemployed anyway.

ClaphamGT3

11,269 posts

242 months

Sunday 22nd May 2016
quotequote all
As someone with no mortgage and a reasonable amount stashed under the mattress, so to speak, I get really, really tired of 'savers' (usually pensioners) moaning about interest rates.

Yes, rates are currently at historic lows - get over it. It's a policy that's unlikely to change any time soon and one that is pathetically easy to do something about; there are plenty of investment options that will see your money making far more than your savings account, so stop moaning and start actively managing your money rather than bewailing that the magic money tree isn't making it grow faster than inflation at the moment

Mr Whippy

28,945 posts

240 months

Sunday 22nd May 2016
quotequote all
Demographics means we're screwed one way or the other.

Huge debt, falling working age population, rising retirement age population.


We're screwed in the EU, we're screwed out of it.

At least out of it we can control how screwed we get on a more local level instead of having little to no control over it.


The only solution is either huge birth rates, or huge immigration. But we're a small country so that means more crowding.

All to pay for the cronies and super rich who sit atop the pyramid that demands this perpetual growth!


Have a nice day biggrin

Derek Smith

45,514 posts

247 months

Sunday 22nd May 2016
quotequote all
crankedup said:
Mortgage payers have had a good number of years of record low level interest rates. Savers have obviously been paying for this with record levels of low interest payments, some verging on negative rates and certainly negative when the inflation rate is factored in.
For the most part it is older people 60 + years on that have been hit, and yet younger people suggest that pensioners should be contributing more in terms of Government deficit reduction penalties.
What happens o this situation post our exit of the EU
I spoke with a stay campaigner yesterday at a multi party event in town. I asked this question. I was given their expert whose reply was that no one knows. He obviously could have lied so the fact that he admitted that the stay mob couldn't claim that as something to shout about seemed to add a bit of veracity to it. It is not, after all, likely that an exit would decrease interest rates.

He said that most experts were of the opinion that there would be a period of fluctuation after a leave vote, even before the actual parting of the way. The rates would, most likely, increase, but no one would say beyond the short term.

As you say, savings have been hit. Mine certainly have. I gambled a bit on shares with some friends and we reckon that if we stay in we will be back where we started in five years or so. If we leave, the recent drop in the FTSE merely on fears of an exit as, despite all the polls showing a majority for remain, it was not a comfortable majority on some, indicated what might happen if there was an exit.

So the odds seem to be that there will be some fluctuation in the short term.


Looket

688 posts

120 months

Sunday 22nd May 2016
quotequote all
In case of a Brexit, my prediction is rate cut over night. If not, we're probably staring down the barrel of a liquidity crunch, yet that'll wreak havoc with the economy so, really, rates need to be hiked.

Basically, we'll be stuck between a rock and a hard place. Still, rather that than being in the EU.

otherman

2,190 posts

164 months

Sunday 22nd May 2016
quotequote all
FourWheelDrift said:
otherman said:
What impact will brexit have on the crispiness of bacon?
I think Cameron said leaving the EU will result in limp bacon.
And Boris said it would result in super-crispy bacon. Who to believe.....

crankedup

Original Poster:

25,764 posts

242 months

Sunday 22nd May 2016
quotequote all
ClaphamGT3 said:
As someone with no mortgage and a reasonable amount stashed under the mattress, so to speak, I get really, really tired of 'savers' (usually pensioners) moaning about interest rates.

Yes, rates are currently at historic lows - get over it. It's a policy that's unlikely to change any time soon and one that is pathetically easy to do something about; there are plenty of investment options that will see your money making far more than your savings account, so stop moaning and start actively managing your money rather than bewailing that the magic money tree isn't making it grow faster than inflation at the moment
Why the angst?' You come across as a first rate tt.

It's a perfectly civil question to ask isn't it and one that forum members may like to discuss.

crankedup

Original Poster:

25,764 posts

242 months

Sunday 22nd May 2016
quotequote all
Derek Smith said:
crankedup said:
Mortgage payers have had a good number of years of record low level interest rates. Savers have obviously been paying for this with record levels of low interest payments, some verging on negative rates and certainly negative when the inflation rate is factored in.
For the most part it is older people 60 + years on that have been hit, and yet younger people suggest that pensioners should be contributing more in terms of Government deficit reduction penalties.
What happens o this situation post our exit of the EU
I spoke with a stay campaigner yesterday at a multi party event in town. I asked this question. I was given their expert whose reply was that no one knows. He obviously could have lied so the fact that he admitted that the stay mob couldn't claim that as something to shout about seemed to add a bit of veracity to it. It is not, after all, likely that an exit would decrease interest rates.

He said that most experts were of the opinion that there would be a period of fluctuation after a leave vote, even before the actual parting of the way. The rates would, most likely, increase, but no one would say beyond the short term.

As you say, savings have been hit. Mine certainly have. I gambled a bit on shares with some friends and we reckon that if we stay in we will be back where we started in five years or so. If we leave, the recent drop in the FTSE merely on fears of an exit as, despite all the polls showing a majority for remain, it was not a comfortable majority on some, indicated what might happen if there was an exit.

So the odds seem to be that there will be some fluctuation in the short term.
Interesting, thanks for posting. Seems that other investments such as a classic car, shares in race horse, case of wine and so forth may be no more of a risk cash deposits, I have exaggerated but you get the drift I hope. If the wine fails to grow in terms of capital appreciation at least the stuff can be drunk to ease the pain of loss.!!! And the car can be enjoyed of course. But not both together..

sealtt

3,091 posts

157 months

Sunday 22nd May 2016
quotequote all
It is all subject to the UK & EU (and of course UK & RoW) agreeing fair trading terms reasonably quickly, the uncertainty caused by the process dragging on or unfavourable terms could cause a serious problem for the UK economy - having a big impact on interest rates and the value of assets & currency.

V8A*ndy

3,695 posts

190 months

Sunday 22nd May 2016
quotequote all
ClaphamGT3 said:
As someone with no mortgage and a reasonable amount stashed under the mattress, so to speak, I get really, really tired of 'savers' (usually pensioners) moaning about interest rates.

Yes, rates are currently at historic lows - get over it. It's a policy that's unlikely to change any time soon and one that is pathetically easy to do something about; there are plenty of investment options that will see your money making far more than your savings account, so stop moaning and start actively managing your money rather than bewailing that the magic money tree isn't making it grow faster than inflation at the moment
You do realise though that most pensioners wouldn't even open an ISA never mind visit an IFA.

and what about those pensioners who invested with IFAs 8 years ago. Bet they wish they left it in the bank.





Ian Geary

4,464 posts

191 months

Sunday 22nd May 2016
quotequote all
chow pan toon said:
FourWheelDrift said:
otherman said:
What impact will brexit have on the crispiness of bacon?
I think Cameron said leaving the EU will result in limp bacon.
I would imagine that if he were asked he would suggest that savings rates would hit -5% whilst mortgages hit 20%, not that it would matter because we'd all be unemployed anyway.
The lucky ones will be unemployed... the unlucky will surely all have died in World War 3..?

JagLover

42,266 posts

234 months

Sunday 22nd May 2016
quotequote all
ClaphamGT3 said:
As someone with no mortgage and a reasonable amount stashed under the mattress, so to speak, I get really, really tired of 'savers' (usually pensioners) moaning about interest rates.

Yes, rates are currently at historic lows - get over it. It's a policy that's unlikely to change any time soon and one that is pathetically easy to do something about; there are plenty of investment options that will see your money making far more than your savings account, so stop moaning and start actively managing your money rather than bewailing that the magic money tree isn't making it grow faster than inflation at the moment
Well technically speaking earning interest on either a bank account or UK government bond should be virtually risk free. Investments that offer a higher rate of return have always been with us but typically come with a higher risk.

It is not particularly healthy for a society or economy for the "risk free" rate of return to be negative after inflation.

This is a policy that is supposed to stimulate spending and borrowing and yet the average person now needs to save more to achieve the same income in retirement.

The quest for any sort of return has created a number of bubbles, most noticeable in property with the BTL boom. So now a policy meant to stimulate spending and borrowing has meant that twenty and early thirties somethings have to save up far more of their income to find a deposit.

The present is hardly unique in having low inflation. It is claimed there was no net inflation in the entirety of the 19th century for example as the gold standard and productivity increases meant prices were as likely to rise as fall. BOE Interest rates however never dropped below 2% and were often much higher.

http://www.theguardian.com/news/datablog/2011/jan/...

Today's policy smacks of desperation and is creating massive distortions.

Clearly the financial crises required a response but a more ambitious QE programme that funded productive activity combined with more "normal" interest rates would probably have been a better option.


crankedup

Original Poster:

25,764 posts

242 months

Sunday 22nd May 2016
quotequote all
JagLover said:
ClaphamGT3 said:
As someone with no mortgage and a reasonable amount stashed under the mattress, so to speak, I get really, really tired of 'savers' (usually pensioners) moaning about interest rates.

Yes, rates are currently at historic lows - get over it. It's a policy that's unlikely to change any time soon and one that is pathetically easy to do something about; there are plenty of investment options that will see your money making far more than your savings account, so stop moaning and start actively managing your money rather than bewailing that the magic money tree isn't making it grow faster than inflation at the moment
Well technically speaking earning interest on either a bank account or UK government bond should be virtually risk free. Investments that offer a higher rate of return have always been with us but typically come with a higher risk.

It is not particularly healthy for a society or economy for the "risk free" rate of return to be negative after inflation.

This is a policy that is supposed to stimulate spending and borrowing and yet the average person now needs to save more to achieve the same income in retirement.

The quest for any sort of return has created a number of bubbles, most noticeable in property with the BTL boom. So now a policy meant to stimulate spending and borrowing has meant that twenty and early thirties somethings have to save up far more of their income to find a deposit.

The present is hardly unique in having low inflation. It is claimed there was no net inflation in the entirety of the 19th century for example as the gold standard and productivity increases meant prices were as likely to rise as fall. BOE Interest rates however never dropped below 2% and were often much higher.

http://www.theguardian.com/news/datablog/2011/jan/...

Today's policy smacks of desperation and is creating massive distortions.

Clearly the financial crises required a response but a more ambitious QE programme that funded productive activity combined with more "normal" interest rates would probably have been a better option.
This is the value of asking the question, a serious response that puts the value back in P/h. Interesting stuff, thanks, can't disagree with any part of it.

loafer123

15,405 posts

214 months

Sunday 22nd May 2016
quotequote all
JagLover said:
Well technically speaking earning interest on either a bank account or UK government bond should be virtually risk free. Investments that offer a higher rate of return have always been with us but typically come with a higher risk.

It is not particularly healthy for a society or economy for the "risk free" rate of return to be negative after inflation.

This is a policy that is supposed to stimulate spending and borrowing and yet the average person now needs to save more to achieve the same income in retirement.

The quest for any sort of return has created a number of bubbles, most noticeable in property with the BTL boom. So now a policy meant to stimulate spending and borrowing has meant that twenty and early thirties somethings have to save up far more of their income to find a deposit.

The present is hardly unique in having low inflation. It is claimed there was no net inflation in the entirety of the 19th century for example as the gold standard and productivity increases meant prices were as likely to rise as fall. BOE Interest rates however never dropped below 2% and were often much higher.

http://www.theguardian.com/news/datablog/2011/jan/...

Today's policy smacks of desperation and is creating massive distortions.

Clearly the financial crises required a response but a more ambitious QE programme that funded productive activity combined with more "normal" interest rates would probably have been a better option.
Great post.

I guess the issue is that a historically more normal 2% spread of interest rates over inflation may well trigger deflation, which gives a whole different and unpleasant set of risky scenarios.

Derek Smith

45,514 posts

247 months

Sunday 22nd May 2016
quotequote all
crankedup said:
Interesting, thanks for posting. Seems that other investments such as a classic car, shares in race horse, case of wine and so forth may be no more of a risk cash deposits, I have exaggerated but you get the drift I hope. If the wine fails to grow in terms of capital appreciation at least the stuff can be drunk to ease the pain of loss.!!! And the car can be enjoyed of course. But not both together..
I had a bit of money. After a bit of a spend fest I put more than half in ISAs and such and for the rest I went with a small group of mates to have fun on the stock market. Nothing too risky overall, but a chance of a bit of extra cash. This was late 2007. Not, as it turned out, a wise move.

That said, things haven't been too bad and were not broke. One chap had to pull out and although our rules said that he had to give a year's notice, he was in trouble so we paid him off. More money after bad it seemed at the time.

At the moment we're nearly even if base rate is included, but only by ignoring the bailing out of one member, and there is talk about closing it down despite some fees. The consensus was that we will wait until after the referendum and then, if the market stays up, we'll sell it off. It's not gone quite so badly as we thought in 2008, but there was little or no fun, the main reason we did it. It was pointless following the share prices. All I've bothered with is the quarterly update, and then not always.

If I'd have left the money in an ISA, I'd have been a lot better off.

We all make mistakes and I've learned my lesson. I'll pass on classic cars. One can't predict.


stongle

5,910 posts

161 months

Sunday 22nd May 2016
quotequote all
Isnt this the same question as the other thread on Mortgages, as the BOE runs monetary policy it sets central bank rates according to inflation & stimulus. But since savers don't have access to the discount window, the BOE rate is only a factor of the deposit or lending rate. No one knows where the economy and inflation will go in the event of Brexit, but the BOE has set mandates to follow. Unless we somehow do Fiscal Policy (personally we might want to look to a strategic UK Soverign Wealth Fund with strict internal infrastructure investment guidelines).

Perhaps you meant to ask (more interestingly) in event of future BOE rates changes, will the banks pass these through evenly; or increase their bid / offer spread. This opens up more variables, certainly the effectiveness of bank levy and other legislative impacts on banks (around solvency). If the economy tanks, it could be the bank spread widens as lending money becomes ever more risky and increased reserves / capital needs to be retained (and debtors get bailed in)....

Bit of a sobering thought....

Edited by stongle on Sunday 22 May 22:54


Edited by stongle on Sunday 22 May 22:55