Brexit and savers interest rates

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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

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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

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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.

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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..

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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.

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Jockman said:

crankedup 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

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.

You could have read that post differently, without preconceptions, and applauded the realism

Remember we are alluding to the same demographic that is sitting on enormous property wealth. I appreciate I am generalising.

Clapham responded to one of my previous innocent posts regarding small towns. He said that my home town is vile with vile people living in the town. He went on with various other insults, fair enough to have an opinion but when he couldn't respond to my pointing out several National ratings which were all highly positive to the town. Increasing numbers of International visitors, voted in the top twenty of best small towns, our beautiful Cathedral and Gardens, Medival Grid in the centre of town and theatres, restaurants, clubs it was obvious his post was no more than an unintelligent non researched off the cuff insult.
Personally I have a pride in where I live and do not take unfounded insult to it and its people, including me, lightly. Taking all this into consideration you may understand my short shift reply to yet another of his lightweight idiotic replies to my question.

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ClaphamGT3 said:

crankedup said:

Jockman said:

crankedup 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

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.

You could have read that post differently, without preconceptions, and applauded the realism

Remember we are alluding to the same demographic that is sitting on enormous property wealth. I appreciate I am generalising.

Clapham responded to one of my previous innocent posts regarding small towns. He said that my home town is vile with vile people living in the town. He went on with various other insults, fair enough to have an opinion but when he couldn't respond to my pointing out several National ratings which were all highly positive to the town. Increasing numbers of International visitors, voted in the top twenty of best small towns, our beautiful Cathedral and Gardens, Medival Grid in the centre of town and theatres, restaurants, clubs it was obvious his post was no more than an unintelligent non researched off the cuff insult.
Personally I have a pride in where I live and do not take unfounded insult to it and its people, including me, lightly. Taking all this into consideration you may understand my short shift reply to yet another of his lightweight idiotic replies to my question.

Although, as I pointed out at the time, I have also lived in the town in question and am of the view that it was a dive then and, visiting it since, it is a dive still.

Fair enough you did say you lived in the town or the neRby village of Culford. What you did not do was respond in any meaningful way to substantiate your comments which I found to be very derogatory and certainly not reflecting the common view of the town You simply said agree to disagree which is a cop out. I posted several comments as I have mentioned, denigrating towns might be OK but without substance it is simply bad form. Bury St Edmunds is certainly not a vile town nor or its folk vile.

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Murph7355 said:

crankedup said:

...
What happens o this situation post our exit of the EU

It gets better as it's a well known FACT that anyone over 60 will be euthanised immediately following a Brexit vote.

Derek Smith said:

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

No st Derek. You should have been a trader



It has always been thus, and will always be thus.

crankedup said:

Clapham responded to one of my previous innocent posts regarding small towns. He said that my home town is vile with vile people living in the town. He went on with various other insults, fair enough to have an opinion but when he couldn't respond to my pointing out several National ratings which were all highly positive to the town. Increasing numbers of International visitors, voted in the top twenty of best small towns, our beautiful Cathedral and Gardens, Medival Grid in the centre of town and theatres, restaurants, clubs it was obvious his post was no more than an unintelligent non researched off the cuff insult.
Personally I have a pride in where I live and do not take unfounded insult to it and its people, including me, lightly. Taking all this into consideration you may understand my short shift reply to yet another of his lightweight idiotic replies to my question.

I thought you were approaching your twilight years cranky...you should be above such things by now, surely? If you love the place you live in, who cares if someone else thinks it's a st hole? The world's a large place. You can always find someone who thinks anywhere is a st hole.

Unfortunately for me I care for my environment, certainly locally where I live. If somebody wants to post silly derogatory comments regarding 'my town' at least they should be able to substantiate such comment. As I have previously mentioned, of course we are all entitled to our opinions, but such strong derogatory comments regarding my town and even the people who live in the town as vile is reprehensible. Ask the thousands of tourists what the think of Bury st Edmunds, it will not match Clapham gt3.
Your right though, somebody somewhere will always be ready to post adverse comment like claphams. I will resist posting my thoughts regarding Clapham !

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ATG said:

crankedup said:

Fair enough you did say you lived in the town or the neRby village of Culford. What you did not do was respond in any meaningful way to substantiate your comments which I found to be very derogatory and certainly not reflecting the common view of the town You simply said agree to disagree which is a cop out. I posted several comments as I have mentioned, denigrating towns might be OK but without substance it is simply bad form. Bury St Edmunds is certainly not a vile town nor or its folk vile.

I was with you right up to the point where you said "Bury St Edmunds"

Thanks

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nikaiyo2 said:

Am I the only one who thinks that actually expecting a significant return from no risk savings is a bit like wanting to have your cake and eat it?

Actually the situation we have now is how it should be, if you want capital growth then you need to put your money where you mouth is an take a risk.
Surely that is the natural order of things its wrong to expect to be able to put money into a bank and be given a great return, for no risk.
Your reward for putting money into a UK bank deposit account is security, not return.

So you believe that the elderly lady or bloke living alone will have the knowledge and spirit to invest in what we would term a well spread portfolio. For most older people living on a pension their savings are of paramount importance, risk to those savings is not usually an option. Of course some will be risk takers but in general most prefer safety.
Given this situation I do not believe your assessment is altogether reasonable.
For the more affluent elderly persons a mixed portfolio of risks is likely acceptable.

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fblm said:

nikaiyo2 said:

Am I the only one who thinks...

No you're not... don't like the rates, invest it yourself.

Fair and reasonable response, however it overlooks the requirement of mutual building societies. We know safety first savers opt for cash savings but in view of the dreadful returns currently, and for the past number of years, are lamentable. If our B.S is not receiving adequate savings it is hard pushed to loan it out. Banks will love this situation of course.

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loafer123 said:

crankedup said:

nikaiyo2 said:

Am I the only one who thinks that actually expecting a significant return from no risk savings is a bit like wanting to have your cake and eat it?

Actually the situation we have now is how it should be, if you want capital growth then you need to put your money where you mouth is an take a risk.
Surely that is the natural order of things its wrong to expect to be able to put money into a bank and be given a great return, for no risk.
Your reward for putting money into a UK bank deposit account is security, not return.

So you believe that the elderly lady or bloke living alone will have the knowledge and spirit to invest in what we would term a well spread portfolio. For most older people living on a pension their savings are of paramount importance, risk to those savings is not usually an option. Of course some will be risk takers but in general most prefer safety.
Given this situation I do not believe your assessment is altogether reasonable.
For the more affluent elderly persons a mixed portfolio of risks is likely acceptable.

Interest rates are not a social policy, they are a reflection of inflation and risk.

How or why do you expect banks to pay higher interest rates for no risk - is it by charging borrowers alot more money for loans?

The artificial record low rates are not a healthy sign for the economy. We know that house prices have been skewed to record levels, in the most part thanks to record low interest rates. Borrowers are once again overburdening or over borrowing on mortgage loans. Banks are once again loosing their rules for borrowers going back to multiple x which will be unaffordable once an interest rate increase comes along.
Agree interest rates are not a Social consideration, but the impact of interest rates has a direct and immediate impact upon society. Our so called Global economy has a lot to answer for and don't get me started on the EU.

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nikaiyo2 said:

crankedup said:

So you believe that the elderly lady or bloke living alone will have the knowledge and spirit to invest in what we would term a well spread portfolio. For most older people living on a pension their savings are of paramount importance, risk to those savings is not usually an option. Of course some will be risk takers but in general most prefer safety.
Given this situation I do not believe your assessment is altogether reasonable.
For the more affluent elderly persons a mixed portfolio of risks is likely acceptable.

No but your risk profile changes as you grow older, obviously it would be strange for an 80 year old to look for a return over 20 years.

I am not for one second suggestion a pensioner should take speculative risks, but there are managed risks, an FTSE tracker is not an excess risk, nor is it a hugely complex investment.

In the same way you call a plumber when your heating is not working, when your car is not working you call a mechanic why not call an IFA when your investments are not working?

I just don't think expecting a return form 0 risk is reasonable

Indeed, a twenty year return would be a low risk in the grand scheme.
Agreed a tracker could be a safer risk, but then it isn't going to offer a yearly return that can be relied upon, just saying.
Low savers rates for seven years are detrimental savers and borrowers as I have previously mentioned.
When somebody invests their cash they are effectively placing it into the middleman to hand out in the form of a loan. I am suggesting that the ratio is unbalanced favouring the borrower to the prolonged detriment of the saver. In my opinion this is not a good place for Mutual Building Societies, although at least they are making a value to attempt to attract other revenue streams.
I am not sure that a IFA is the resolution for the elderly persons savings nest, of course that is broad rush. Just imagine if the IFA got it magnificently wrong for all those 80 year old pensioners wiping out half of their life long savings. !! No they rely upon cash into ISA or other cash savings accounts in the main.

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fblm said:

crankedup said:

The artificial record low rates are not a healthy sign for the economy.

Fair comment but raising rates will not improve the economy, quite the opposite. For every 5 quid a month more your cautious pensioner gets in bank interest his kids pay another 50 quid a month on their mortgage... Secondly interest rates are an artificial construct; there is no natural level where they should be. The BoE's mandate is an artificial inflation target with an implicit proviso that it shouldn't be at all costs. Ie the rate is set at a level that experience suggests provides an acceptable level of growth and employment vs inflation. It's not a tool for social engineering. If the government wants to reward savers there are far better ways like via nsandi.

They are indeed a construct, it's just that I happen to believe that the artificially low rate that has been sustained for so long is damaging rather then helping. It has been a great aid to housing inflation, it is penalising the very people that the Government is supposed to be encouraging-- savers. It has encouraged borrowers to once again become over indebted. When the rates are eventually raised it will be catastrophic for those who have taken on too much debt
We have been here before and it always ends in tears, and we are heading for another storm soon. I am not, and never have advocated social engineering by the use of interest rates, but this is what is happening, those sitting on a debt mountain are being subsidised, hopefully the sensible will foresee the problem on the near horizon and fix into a rate they can afford.
Bonds are fine, quite agree, but again perhaps not for oldies.

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don4l said:

crankedup 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

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.

What angst?

Clapham is giving perfectly good advice.

The interest available on savings accounts has always been less than inflation. Inflation is very low at the moment and so are interest rates.

I got into the stock market in 2008, and have been very pleasantly surprised.

Managed funds in this country seem to be a complete rip-off. On this, I think that we agree.

The solution is to do some research and manage your own funds.

Possibly late in don, Clapham and I have discussed this issue.
My Thread is not referring to my personal situation but a general question and observation. Yes I agree and certainly do my own personal research regarding my investments.

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Stay in is the order of the day it seems, political motivation from the BOE !!!!!!

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fblm said:

crankedup said:

...I happen to believe that the artificially low rate that has been sustained for so long is damaging rather then helping.

Had the BoE hiked rates to a worthwhile level for savers (say 3-4% ?) any time since 2008 they would have put hundreds of thousands, if not millions out of work. You think the public sector 'cuts' you have now are 'too much, too fast'?

crankedup said:

It has encouraged borrowers to once again become over indebted.

Not true. Total household debt is more or less unchanged since the recession. Per capita debt has obviously fallen and debt as a % of income has fallen sharply.

crankedup said:

We have been here before and it always ends in tears, and we are heading for another storm soon.

h
I think you would enjoy Extraordinary Popular Delusions and the Madness of Crowds by Charles Mackay. Its 150 years old and just as relevant today as it was then. Contrary to Gordon Browns own epic delusion he did not end boom and bust.

crankedup said:

...those sitting on a debt mountain are being subsidised...

Where do you think the money has come from to pay savers interest for the last 2000 years?

crankedup said:

Bonds are fine, quite agree...

I certainly never suggested that! If you're worried about rates going up (fixed income) bonds are just about the worst place to put your money.

I am not suggesting BOE rates should rise to 3 or 4% that is your pure speculation and an almost impossible scenario at the present time.

Borrowers are becoming over indebted, I appreciate what the chart you posted argues this is not so, but it is three years out of date. My reading was indicating that banks are loosening the restrictions for mortgage applications a and borrowers are taking advantage of this.

Borrowers have of course paid savers the point is it's not enough at the moment, borrowers are getting a free ride on the backs of savers It is the level of reward for savers that is punishingly low, some is negative when taking into consideration inflation. This suggests an imbalance as I have previously mentioned BOE was suggesting that rates could rise in small increments of perhaps .25% but this was six months ago and still nothing changes.

I wish I had your confidence regarding the state of our National finances, my concerns are not , as you suggest, delusionary.
I see almost nothing on the horizon that suggests good times are around the corner, I do see plenty of obstacles presenting risk. But that is my perogative as it is your to take an opposite POV. Even economists cannot agree the future.

Guaranteed Government bonds are fine, I am not concerned that rates are about to rise. The problem for savers is just that, rates are going nowhere.

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Mr Whippy said:

ClaphamGT3 said:

Mr Whippy said:

Like I've said a few times now, rates will only rise when people notice they've had a big wealth/income buying power haircut.

Best to either have no debt, or have had a big load of debt for some years on assets bought pre 2012 or so at the latest, at that point.


I'm not sure where you're best with savings though.

In practice when rates rise it'll be good, but it'll only be helping savings return to parity to where they should have been... so it'll still be like a lost decade in savings growth.

I suppose the only real answer is that if you've just had savings sat in the bank earning nothing, it's already too late

But it's only a lost decade out of choice. No one has been forced to keep their savings on deposit. Since interest rates have been at current levels, there have always been investment opportunities to outperform inflation. If people don't have the appetite for risk to invest in this way, it's no ones fault but their own.

You're right.

But those savers have low risk outlook, and given UK governments projections for improving growth and raising interest rates (but being wrong and not raising rates) each year since 2009, it's tough to have expected these moderate to low risk savers to have moved out into stocks and shares actively.

Yet government seems to have actively supported assets via QE, so the riskier investments have had support, while the low risks ones have apparently had none.

Lets put it this way, I don't blame people for falling foul of low interest rates. I blame government for distorting the ROI landscape.

Dave

It's surprising to me that others have trouble seeing this, to suggest that savers should become active in stocks and shares is utterly ridiculous. It demonstrates a disconnect of reality that older people have had to face since 2008 to this day. It completely overlooks the rising dementia, anxitiety and plain ignorance regarding investments. My late dad had trouble deciding what day of the week it was never mind be an active investor.
Do any of these posters have any Social experience or knowledge at all I wonder.

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Big money is going into top end cars both new and classics, sales of top end ocean going tugs. Personal aircraft and of course land ad property. Top end bling, travel, racehorses and more besides. Of course it's so much money it cannot be spent out as such. Our lad works for a multi billionaire, a genuinely decent family.

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fblm said:

crankedup said:

I am not suggesting BOE rates should rise to 3 or 4% that is your pure speculation and an almost impossible scenario at the present time.

I didn't say you did. I suggested 3-4% as a level worthwhile to savers because any less was below inflation for most of the last 7 years.

crankedup said:

Borrowers are becoming over indebted, I appreciate what the chart you posted argues this is not so, but it is three years out of date.

The graphs clearly show your assertion is wrong. Not only are households on average less indebted than before but compared to income they are much less indebted. Out of date? OK I'll do your googling for you...

http://www.economist.com/news/britain/21685499-wor...

Honestly cranked if you want to be an investor now, you can't just dismiss reliable data that completely contradicts your macro opinon.

crankedup said:

Borrowers have of course paid savers the point is it's not enough at the moment, borrowers are getting a free ride on the backs of savers...

It's symbiotic, one doesn't exist without the other. I'm also a saver not a borrower, so I lose a good few k a year in deflation. To make any kind of return on our cash we need rates at a level that puts a few million in negative equity and a few million out of work. I thought you were the socialist and I was the rapacious capitalist!

crankedup said:

I wish I had your confidence regarding the state of our National finances, my concerns are not , as you suggest, delusionary.

Dear god cranked did you hit the sherry early today? I was agreeing with you regarding an inevitable correction. I certainly didn't say you were delusionary, unless your name is Gordon Brown. The relevant part of the book I recomended regards financial manias and crashes. So long as we are free to buy and sell things or borrow and lend money there will be booms and crashes, fear and greed, it's human nature.

crankedup said:

I see almost nothing on the horizon that suggests good times are around the corner, I do see plenty of obstacles presenting risk. But that is my perogative as it is your to take an opposite POV.

I agree. WTF?

crankedup said:

...rates are going nowhere.

That's what I said in answer to your threads main question!

Looks like my reading material needs to change regarding the indebtedness of folk. It's strange that in view of the housing costs inflation together with wage stagnation and the fact people are desperate to get onto the housing market, the banks freeing up restrictions on lending people are able to reduce debt!! How the hell is that? Perhaps the indebtedness statistic will show next year?

As for the 3 or 4% BOE rate, I did not suggest anything of the sort!! I said that rates are so low and have been for seven years that it is punishing savers. The elderly in the main cannot be expected to be able to cope with more sophisticated investments (no disrespect intended) obviously some are well capable. The rate has caused an inbalance.

I am a Socialist in a rinsed out blue way, Prosecco Socialist perhaps. My concern is for those that have and continue to be victims of the finance crash. I have a modest sum of cash in the Natipnwide BS, I see the CEO has enjoyed another salary increase to three million a year. Yes I have objected but apathy amongst members means the Board get away with this. I could leave of course and I expect that is what I will do. Meanwhile the BS has recently cut savers rates down to about .25% It is this type of piss take that really upsets me. Didn't want to bring in the pay bit because I have done it to death, but just couldn't contain myself.

Perhaps this new financial environment has caught me out, well it seems it has as I do not seem to have a handle on it. Been a private investor since mid eighties and never seen so many clouds as what appears now. It's not a fortune but retirement means loses are not easily replaced.