How Low Can Rates Go? Radio 4

[nome]

http://www.bbc.co.uk/programmes/b07krycg

Not had chance to listen myself, available on catch up later.

[rantnrave]

Re savings rates getting hammered - at the start of this year we got notification that the interest rate was being reduced on the longstanding savings account we had been using. We’d kept funds in there because there was no upper limit, but our deposit was now well past the reduced FSCS limit and the institution is a BTL-lending machine which concerned me on a moral level and with regard to the safety of our funds.

With the new tax-free interest limit of £1k coming into effect too, I have been on a rampage with bettering the returns from savings which can be out there.

Here’s what we’ve done:

• Santander 123 accounts in Mr and Mrs Rave’s names and a joint account. While they have put the monthly fee up, the cashback on direct debits partially negates that. We’re still earning roughly 2.75% tax free on £60k with these.
• Santander Help to Buy ISA (yes, I know) – 4% a year. Opened one for each of us with £1.2k and top this up with the monthly limit of £200 in each account. By the end of the year this will equal £6k at 4% tax free with another three years to keep adding to this (I am not bothered about the bonus 25% at this time)
• TSB Plus account - £2k at 5% for each of us. As with Santander, this requires money to be paid in each month, but I’ve set up standing orders between these and an account with another provider, shuffling the same money around. TSB also offer £5 cashback per month for each account with the first £100 of contactless Debit card use. We make sure we get that, while always keeping the balance above £2k. The cashback deal finishes at the end of this year, but that’s still effectively £320 a year on £4k with buying things we would be buying anyway.
• Nationwide Flex account - £2.5k each at 5%. Similar set up re shuffling money around to qualify. There is also an option to open a FlexDirect saver, with £500 and then add up to £500 each month which is also at 5% interest. This is a one year deal, worth £550.
• Tesco Bank current account - £3k for each of us at 3%. No extra hassle here – no direct debits or fees involved. Seeing if we can also open a joint one. If that works, it’s £270 a year off £9k.

All in all, that's 3.36% which can be earned on as much as £90k.

Edited July 21, 2016 by rantnrave

[nome]

Only managed to listen to a couple of minutes of it in the car but what I did catch was dismissive of the whole "low interest rates encourage people to spend" philosophy and was saying low I.R's more likely to reduce consumer spending and are only beneficial to a relatively small number of people (debt junkies) in society as a whole.

[TheCountOfNowhere]

A better question is...how high can rates go and how quickly !!!

[Pop321]

Re savings rates getting hammered - at the start of this year we got notification that the interest rate was being reduced on the longstanding savings account we had been using. Wed kept funds in there because there was no upper limit, but our deposit was now well past the reduced FSCS limit and the institution is a BTL-lending machine which concerned me on a moral level and with regard to the safety of our funds.

With the new tax-free interest limit of £1k coming into effect too, I have been on a rampage with bettering the returns from savings which can be out there.

Heres what weve done:

• Santander 123 accounts in Mr and Mrs Raves names and a joint account. While they have put the monthly fee up, the cashback on direct debits partially negates that. Were still earning roughly 2.75% tax free on £60k with these.
• Santander Help to Buy ISA (yes, I know) 4% a year. Opened one for each of us with £1.2k and top this up with the monthly limit of £200 in each account. By the end of the year this will equal £6k at 4% tax free with another three years to keep adding to this (I am not bothered about the bonus 25% at this time)
• TSB Plus account - £2k at 5% for each of us. As with Santander, this requires money to be paid in each month, but Ive set up standing orders between these and an account with another provider, shuffling the same money around. TSB also offer £5 cashback per month for each account with the first £100 of contactless Debit card use. We make sure we get that, while always keeping the balance above £2k. The cashback deal finishes at the end of this year, but thats still effectively £320 a year on £4k with buying things we would be buying anyway.
• Nationwide Flex account - £2.5k each at 5%. Similar set up re shuffling money around to qualify. There is also an option to open a FlexDirect saver, with £500 and then add up to £500 each month which is also at 5% interest. This is a one year deal, worth £550.
• Tesco Bank current account - £3k for each of us at 3%. No extra hassle here no direct debits or fees involved. Seeing if we can also open a joint one. If that works, its £270 a year off £9k.

All in all, that's 3.36% which can be earned on as much as £90k.

Ditto with Lloyds Club thrown in. I am also feeding about 6 monthly saving accounts (from capital)....but will then need to empty them each year.

My skipton old loyalty online account was 1.4% and that drops to 1%. The loyalty ISA is 1.5% at the moment.

I am playing mortgage v's saving rates. But for those who are not....These look like difficult times.

[North London Rent Girl]

Interesting. It's presented on the premise that the original cause was a global financial crisis that fell out of a clear blue sky but the contributors don't all go that way. One says that the problem might have been that we allowed too much to build up to start with. Liked the man from Hermes investment mgm - have looked him up, think his name is Saker Nusseibeh, he said that people working in the financial markets (or did he say economists?) understand how people behave when they have large amounts of money but not small amounts. Said that we've created an Alice in Wonderland world - e.g. £30 million for a 3-bed flat in London. I wonder what he thinks of 3-bed flats going for £1 million. Does that qualify for Alice in Wonderland world these days?! Interesting discussion of helicopter money - bring it on!

Seems to me every point they're discussing could do with at least an hour of prime-time R4. As ever it's missing the people they didn't interview before the crisis and now never will because they need to maintain the fantasy that nobody saw it coming. But qua MSM discussion, def worth a listen.

[kzb]

The programme openly discussed helicopter money and negative interest rates. The problem, you see, is that there is no demand. People are saving too much and aren't spending.

What is needed is negative interest rates to encourage them to spend it before they steal it via the negative interest (a rate of -10% was mentioned).

No mention that people are having to spend all their money on housing of course.

Alternatively, helicopter money, in other words printed money to be handed out to every adult in the country, in the hope that they spend it.

To be fair, dissenting voices were given air time, but nevertheless the point of the programme was to get this idea out there: prepare for negative interest rates.

[North London Rent Girl]

Yes did have slight feeling that we were being softened up for something. Also agree that dissenting - edit: sort-of dissenting but still comfortably within the mainstream - voices given air time, and there was mention near the beginning and at the end of the fact that the market as currently constructed has catastrophically failed to deliver for too many people and wealth not being sufficiently shared.

Question: if rates go properly negative, in nominal terms, so people like me who are rubbish at personal finance can't kid themselves any more, why wouldn't savers just take cash out and stash it under the bed? Stealth it away in plant pots. Bury it in the garden. OK so now you all know where to look! Apart from the obvious danger of theft by individuals all at once, instead of this death-by-a-thousand-cuts theft by the government, why wouldn't we just do that?

Edited July 21, 2016 by North London Rent Girl

[kzb]

I think a lot WILL attempt to put it under the mattress, correct. The huge increase in burglaries will stimulate the economy.

But bear in mind dealing in cash is becoming more and more restricted. Already you need to justify to your bank why you want to draw out more than £1k or so. You cannot buy anything expensive for cash.

You need a licence, costing c. £100 p.a., to deal in cash above a certain amount.

If they brought in negative interest, I am sure at the same time they will bring in further restrictions on cash withdrawals and use of cash.

[North London Rent Girl]

That is really shocking. You need to justify taking more than a grand out? I'm tempted to go and do it just so I can kick up a fuss about it. But before I do that I might just nip online and see about buying shares in leading safe-manufacturers... And price safes while I'm at it...

[kzb]

The other thing they can do is change the design of the bank notes.

Give people just a few weeks to swap their notes in for the new ones, but limit it to £100 per transaction. They did this in Europe fairly recently. The ensuing queues ensure little cash is actually swapped and people have to pay it into bank accounts instead.

[North London Rent Girl]

The other thing they can do is change the design of the bank notes.

Give people just a few weeks to swap their notes in for the new ones, but limit it to £100 per transaction. They did this in Europe fairly recently. The ensuing queues ensure little cash is actually swapped and people have to pay it into bank accounts instead.

Wow, really? I spent hours queuing for new notes in Russia in 199 - er 2? No, 1993, when they knocked some zeros off the end of the currency. It actually turned into quite a nice day because we were queuing for so long that everyone got chatting. And lots of people were willing to change up notes for the bomzhi - homeless people without documents. It was probably one of my nicer experiences of public life in Russia, which is generally unpleasant, but still, it was very, very odd. A bank note swap in Blighty, good lord, who'da thunk we might have such a thing in this mature democracy, this long-established, stable economy. Am beginning to think anything is possible, and not in a good way. Of course, the Russian one was caused by a very high rate of inflation, which is something we will definitely never see here ...

[kzb]

There is a lot of detail available on the new polymer notes, which will start with a new polymer fiver in September. I seem to remember there is no new £50 note planned.

What is more difficult to find out about is will these new notes be microchipped?

I think it is highly likely they will be. It will then be a simple matter to track the history of a bank note and it will be easy to detect at customs.

[interestrateripoff]

-100%??

[Unbowed]

The other thing they can do is change the design of the bank notes.

Give people just a few weeks to swap their notes in for the new ones, but limit it to £100 per transaction. They did this in Europe fairly recently. The ensuing queues ensure little cash is actually swapped and people have to pay it into bank accounts instead.

Perhaps we should all take in out in £2 coins then.. they cant change all those vending machines that quickly.

Add value to your home by extending it, to house your coin collection.

-ve rates would just encourage me to buy foreign shares or gold coins.

P.S. Another Regular saver account, £250 @ 3.05% with the Leeds.

[winkie]

Only managed to listen to a couple of minutes of it in the car but what I did catch was dismissive of the whole "low interest rates encourage people to spend" philosophy and was saying low I.R's more likely to reduce consumer spending and are only beneficial to a relatively small number of people (debt junkies) in society as a whole.

Correct......the lower it goes the less is spent and the more people save to make up on the loss of interest.....Hard times people tighten their belts and do things differently in a better way.

[Impatiently Waiting]

If we ever get helicopter money it will most likely be in the form of pre-paid MasterCard cards that have an expiry date of 6-12 months on them. That way the money can't be saved and the populace have a deadline for when to spend it.

Easy.

[winkie]

....or reduce the need for money and collectively swap, time, skills and services within the community.

I'll scratch your back if you scratch mine.

Edited July 21, 2016 by winkie

[kzb]

Impatiently Waiting; yes I was thinking on similar lines. Or it could be issued in shopping vouchers with expiry dates.

Winkle: I really can't see many people leaving their life savings in the building society with -10% going out every year. And they are not going to make it easy for you to simply take it out in cash.

Another big problem is pension pots. How on earth can you get a return AND security ?

[TheCountOfNowhere]

Just thought of a better thread name...How low can bankers go ?

[winkie]

Impatiently Waiting; yes I was thinking on similar lines. Or it could be issued in shopping vouchers with expiry dates.

Winkle: I really can't see many people leaving their life savings in the building society with -10% going out every year. And they are not going to make it easy for you to simply take it out in cash.

Another big problem is pension pots. How on earth can you get a return AND security ?

Who said anything about life savings, eggs and baskets and all that......instant access emergency savings.....medium term, and long term pension savings.......thing is some people treat the equity in their homes as their short term borrowed savings....only ratchets up ever more debt to pay back later on the never, never.....

[thewig]

If we ever get helicopter money it will most likely be in the form of pre-paid MasterCard cards that have an expiry date of 6-12 months on them. That way the money can't be saved and the populace have a deadline for when to spend it.

Easy.

If so I'd be maxing out said mastercard to put down as many minimum deposits as I could muster on some badass little shared ownership help-to-buy studio flats in slough/luton (whichever has the highest prices) to just rent out to unsuspecting students/immigrants/young professionals then sit back and watch the rents roll in. Perfect

[TheCountOfNowhere]

If so I'd be maxing out said mastercard to put down as many minimum deposits as I could muster on some badass little shared ownership help-to-buy studio flats in slough/luton (whichever has the highest prices) to just rent out to unsuspecting students/immigrants/young professionals then sit back and watch the rents roll in. Perfect

Innit ?