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Boe Base Rate Now Irrelevant


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Or can anyone explain why a few months ago the best return on long term fixed savings was 3% and now it is 5% ?

I believe that next year I will be able to get 5%+ return on a one year fixed rate savings account.

Given that base rate has always been set for short term political reasons not long term economic ones, can anyone explain what relevance it has to the real economy?

After all, it doesn't matter how cheap credit is if there is none available.

In fact why would a bank lend to a business in the current very risky climate if all they are going to get is a 0.5% return?

IMHO Mervyn King is a clown and talk of low interest rates is just a smoke screen to hide the fact that QE will inevitably cause inflation, which will inevitably lead to high interest rates.

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Or can anyone explain why a few months ago the best return on long term fixed savings was 3% and now it is 5% ?

I believe that next year I will be able to get 5%+ return on a one year fixed rate savings account.

Given that base rate has always been set for short term political reasons not long term economic ones, can anyone explain what relevance it has to the real economy?

After all, it doesn't matter how cheap credit is if there is none available.

In fact why would a bank lend to a business in the current very risky climate if all they are going to get is a 0.5% return?

IMHO Mervyn King is a clown and talk of low interest rates is just a smoke screen to hide the fact that QE will inevitably cause inflation, which will inevitably lead to high interest rates.

Or indeed mortgages fixed for =>10 years for less than 5.5%. It's over.

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i keep saying it, but i think we live in an evil country/world. This can be demonstrated via interest rates which are currently at their lowest for 300 years!!!! What that means is that they have never been this low and prior to 300 years ago banking history is totally irrelevent. so ask why? Why have they never been low? Because banks are businesses, interest rates reflect the cost of borrowing money of which a part of is saving money, at a lesser rate. So how can they operate at 0.5%? They cant. If they could, it would have happened time and time again in the past. so the answer is that there must be some other objective, and that is political/power. They are low to achieve other goals and that is to ENFORCE the notion of wealth within a particular asset, the house. By enforcing inflated house prices they maintain control of wealth and power.

Its one rule for them, another for us.

Is my credit card interest rate 0.5%? Is it 1%? is it 2%? No, its the same stupid number its been forever, something like 15%.

Personally I think the govt is trying to stop me getting £300+ each month for free, which is a nice earner, I must say. Currently I get £25.....

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It does seem like the real interest rate is about 4%. It is only those borrowers on SVRs and who are still on tracker deals that actually benefit from the BoE rate.

It used to be that only those in negative equity were trapped - now it is anyone with less than 30% equity. The only thing keeping them afloat is their low interest rates, which they would kiss goodbye to even if they could move.

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i keep saying it, but i think we live in an evil country/world. This can be demonstrated via interest rates which are currently at their lowest for 300 years!!!! What that means is that they have never been this low and prior to 300 years ago banking history is totally irrelevent. so ask why? Why have they never been low? Because banks are businesses, interest rates reflect the cost of borrowing money of which a part of is saving money, at a lesser rate. So how can they operate at 0.5%? They cant. If they could, it would have happened time and time again in the past. so the answer is that there must be some other objective, and that is political/power. They are low to achieve other goals and that is to ENFORCE the notion of wealth within a particular asset, the house. By enforcing inflated house prices they maintain control of wealth and power.

Its one rule for them, another for us.

Is my credit card interest rate 0.5%? Is it 1%? is it 2%? No, its the same stupid number its been forever, something like 15%.

Personally I think the govt is trying to stop me getting £300+ each month for free, which is a nice earner, I must say. Currently I get £25.....

I did actually start a thread the other day, before the site crashed? along the lines of was the last 300 years of history a blip.

If interest rates at 0.5% have not been a good idea for 300 years, why are they a good idea now?

What has changed?

In the REAL world interest rates are actually already higher than their long term average of around 3% I think,

So what relevance does base rate have, apart from trying to stoke up another house price / stock market bubble before the next election

After which these bubbles will inevitably burst with disasterous consequences for the economy.

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I am bumping this because I would really like some answers from the people who are trying to convince everyone that interest rates are only 0.5% and that they will stay at this level for the next 5 years.

Since the BOE rate bears no relation whatsoever to the "real" interest rate they could very well stay at 0.5% for a long time. As far as I see it the average mortgage SVR is around 3.5% and the rate for an unsecured loan is around 7.0%. Those are the rates which affect the great majority of credit consumers.

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They are relevant because anyone talking out a tracker mortgage now at 5% could see their payments rocket in rates climb to "normalish" levels, where-as people who took out a tracker mortgage a couple of years ago when rates were "normalish" is now paying nothing.

The effects of the former wont be noticable until rates rise, and the effects of the later will become clear as people come off their fixed rate deals over the next 6 mnths.

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Since the BOE rate bears no relation whatsoever to the "real" interest rate they could very well stay at 0.5% for a long time. As far as I see it the average mortgage SVR is around 3.5% and the rate for an unsecured loan is around 7.0%. Those are the rates which affect the great majority of credit consumers.

So have the BOE now rendered base rate irrelevant to the REAL economy because it is being used as a political tool rather than as independent economic one?

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I thought it was obvious, the low interest rates are there to let the banks rebuild their asset base by charging a margin that could not be supported if interest rates were at normal levels. Just last week I checked the interest rate I was getting on my A&L online saver ("high interest") account it was 0.1%!!! Meanwhile they are charging an SVR of 4.99%

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I thought it was obvious, the low interest rates are there to let the banks rebuild their asset base by charging a margin that could not be supported if interest rates were at normal levels. Just last week I checked the interest rate I was getting on my A&L online saver ("high interest") account it was 0.1%!!! Meanwhile they are charging an SVR of 4.99%

You should really look at other accounts, I'm sure the A&L have a current account paying 6% now on balances up to 2.5K.

savings rates have gone up by approx 2-3% in the last few months.

Scottish Widows are currently offering a 5 year fixed rate savings bond at 5.15% and other Building Societies are offering 5 year bonds paying over 5% - but I have not gone for any of these because I believe I will get a better rate than this next year.

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If interest rates at 0.5% have not been a good idea for 300 years, why are they a good idea now?

Because through most of history interest rates where determined by the market. For every borrower there had to be a saver willing to lend their savings. Credit bubbles could not occur because as the number of borrowers rose, the savers would demand more. The reverse was also true. If there was little appetite for borrowing, savers would demand less.

Those expecting to borrow at 0.5% are deluded. The banks have to cover their operating costs, cover defaults, and still make a profit, even if they can borrow for free. I would not be willing to lend my money to a risky stranger without some return. I would keep it safe in a vault. This is where central banks come in. There is no longer a need for savers at all. The BoE creates credit out of thin air displacing savers. When a bubble develops and the demand for savings grows, the savers are not able to prevent it by raising their rates because the BoE undercuts them offering even cheaper credit. In a stable system it is impossible for all asset classes to rise, because the money going into one sector must come from elsewhere. We have seen this condition because the money was coming from nowhere, it was invented, or I should say counterfeited, by the banks.

The current situation discourages saving by offering negative interest rates compared to the inflation caused by money printing. This encourages savers to move to assets for wealth protection propping up the artificial prices created by the bankers earlier counterfeiting. Once all savings are in assets, the only way to prop up prices is more printing with spin calling it quantitative easing. With inflation the government takes your money indirectly or directly via capital gains tax

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