NS&I announces unprecedentedly large rate cuts on 24 Nov. A devastating blow for savers

[Ah-so]

13 hours ago, longgone said:

Nsi Is guaranteed though and not subject to the fscs limit.

That's not a problem for me. And I will have almost emptied my Marcus account soon due to major house renovations.

[Pop321]

Moved £100k to premium bonds last year and a huge chunk into the income bonds a few months ago. 

Few comments on here ring true on this thread. 

I can buy a one bed flat (auction, scruffy, tenanted) for £110k ish and get £6k a year. I won’t but they are definately pushing people out of savings. 

I rarely move savings around but the 1.16% ‘fully government backed’ verses what the banks were offering was a no brainer...so even I moved. I just wonder how much money outflowed from banks (and what with their wonderful share prices and business outlooks at the moment) I think someone has had a word. Also the inflow into NS&I must be interesting. Even 2 mates down the pub had moved their money to NS&I and told me about it. 

Not sure what I will do. I am ISA’d up to the FSCS limit already with the Skipton and won’t go over that with any bank. 

I will move it from NS&I, but keep the minimum in should rates rise again....I may even repay some of the pricer debt if only to stop myself spending. I guess the government will need to pay for Covid and they want us to spend our way out of recession....this rate drop will help many spend it. I guess they want us to just keep borrowing because it creates cash and also an asset for the bank....everyone is happy until the pyramid runs out I guess  

NB appreciate this sounds like my diamond shoes are too tight...I don’t moan for my position rather the madness of the interest rate position and the impact it will have (savers, FTB house buyers and the economy) in real people with real issues. I will just continue to play the game. 

Edited September 22, 2020 by Pop321

[Freki]

14 hours ago, Ah-so said:

The proportion of funding that comes from direct government loans schemes is actually quite small.

But this was not really what we are talking about it here - it is the general process of introducing new money into the system to keep the economy ticking over in times of stress. Done quite effectively during the financial crisis with relatively limited negative impact compared to the horrors of the alternative. Yes, it did result in a surge in asset prices, particularly housing, and a collapse in interest rates, which I definitely feel is a negative factor, but the idea that we should have a fixed money supply/gold standard is very naïve.

Right, the issue is then that you assumed I wanted a fixed money supply. 

The problem is the scale of the printing, and what it is used for. It is used to annihilate price discovery, and as I said, it devalues the value of working for living. BTL is a great example of over leveraging for a living. Also I believe that economic crisis need to follow some of their course. The printing had for effect to preserve a status quo, to introduce moral hazard and in effect treat a debt problem with more debt.  

[Locke]

27 minutes ago, Pop321 said:

this rate drop will help many spend it.

No, it doesn't. Low interest rates reduce spending, because people understand subconsciously that they have to save more wealth to be secure and have a happier future.

[Locke]

16 hours ago, Freki said:

Now the banks have little need of people's money and have direct access to the BoE to refinance. I know there are some ratios that are needed for a bank to keep functioning.

Hmm. Deposits with a bank are actually listed as liabilities for that bank. 

With today's system, banks are really struggling to survive.

[Locke]

14 hours ago, Ah-so said:

Done quite effectively during the financial crisis with relatively limited negative impact compared to the horrors of the alternative.

Hahahahaha.

14 hours ago, Ah-so said:

the idea that we should have a fixed money supply/gold standard is very naïve.

Forcing someone to use your currency at gunpoint is evil. Full stop.

Using monetary metals is one voluntary (the important bit) alternative.

[Tulip_mania]

13 hours ago, sammersmith said:

I don't know. Personally i'm bored of moving my housing deposit around to try and gain an extra 0.x%. 

I cashed out my Nationwide ISA earlier in the year to buy income bonds when NW dropped their rates. Because of ISA repayment flexibility I could put it all back and get 0.8% but I haven't seen any annoying Nationwide TV adverts recently so maybe they're the bank in trouble.

I'll probs just leave it where it is. At least it's safe and i'll be spending all of it in about 6-9 months hopefully.  

True there will be an amount that came in that doesn't go back out, but generally the money that has gone in is from those who follow the best rates. Even at the new rates £40-50k in Premium Bonds is probably a worthwhile shout. Effective interest rate for that level of deposit will be slightly below the nominal 1%, though better than many options. All the small Building Societies at around 1% will run a mile if that volume of money comes their way, Nationwide have some 0.4% fixes.

[Pop321]

18 minutes ago, Locke said:

No, it doesn't. Low interest rates reduce spending, because people understand subconsciously that they have to save more wealth to be secure and have a happier future.

Not sure the ‘majority‘ understand much at the moment....but okay maybe not ‘spend’ but rather chase a yield into other things ie property, pensions, shares. 😉

[Ah-so]

18 minutes ago, Locke said:

Hahahahaha.

Forcing someone to use your currency at gunpoint is evil. Full stop.

Using monetary metals is one voluntary (the important bit) alternative.

Oh save me from your libertarian mumbo jumbo. It's edgy if you are 19, not if you are a middle aged man banging on about being forced to do things at gunpoint. It's a childish exaggeration.

[A.steve]

15 minutes ago, Tulip_mania said:

Effective interest rate for that level of deposit will be slightly below the nominal 1%, though better than many options.

That 1.0% figure is the one quoted on the NS&I rates page.  I would like to know more about the volatility in returns.  For example:  if someone were to invest £100,000 - then they'd expect £1000 return per year - but it would not be regular.  I'd like to know the distribution of sizes of payouts.  If  NS&I premium bonds paid a single saver £100m once every 3 years, that'd be a problem.  If the bulk of premium bond prizes were between £50 and £500, then - perhaps - that would not be.

Any idea where to get the breakdown?

[longgone]

2 hours ago, Ah-so said:

That's not a problem for me. And I will have almost emptied my Marcus account soon due to major house renovations.

Could be money badly or well spent yet just have to find out.

[longgone]

We need mr Lewis advising the plebs spending money abroad on homes and chinese goods from Ali Express or 2nd had stuff is Good for the uk economy.

I'm sure they banks will like that.

[Locke]

51 minutes ago, Ah-so said:

Oh save me from your libertarian mumbo jumbo. It's edgy if you are 19, not if you are a middle aged man banging on about being forced to do things at gunpoint. It's a childish exaggeration.

No argument = point conceded.

Thank you

[Locke]

1 hour ago, Pop321 said:

Not sure the ‘majority‘ understand much at the moment....but okay maybe not ‘spend’ but rather chase a yield into other things ie property, pensions, shares. 😉

Hence, subconsciously. If you are getting 10% on your bank savings, you will feel richer (assuming you are a productive member of society and not a debt whore) and therefore more inclined to spend than if you are getting 0.1% or even negative.

You don't have to actually understand anything about economics.

[Si1]

3 hours ago, TheCountOfNowhere said:

indubitably

Rishi and Haldane's mythical v-shaped recovery is looking shaky.

Kate Nichols, the vi head of the hospitality trades association, is whingeing how it will affect restaurants. She was a special pleading cheerleader for the eat out to help out scheme and recently wanted it extending into September. That worked well heh.

[Ah-so]

1 hour ago, longgone said:

Could be money badly or well spent yet just have to find out.

As it's an extension, it will be money well spent from day 1 due to having more space for us, even if it added zero to the value of the property. But based on local price per square foot, I should easily get my money back and probably more.

[rantnrave]

We’re changing the interest rate on your Plus account.           Dear Rant,           We wanted to let you know that from 2 December 2020, we’re reducing the interest rate on your Plus account from 1.50% AER* to 0% AER.

[Freki]

Ouch!

[Greater Fool]

As deposit rates are 0 and we are looking at -ve could banks legally charge a "small fee" on positive balances with only a letter or email as notice?

[Chunketh]

 

We’re changing the interest rate on your Plus account.           Dear Rant,           We wanted to let you know that from 2 December 2020, we’re reducing the interest rate on your Plus account from 1.50% AER* to 0% AER.

Yeah I just got that. Another one to close on December 2nd. Santander is already gone. Lloyds/BOS wont be far behind (still @ 2% for a week then 1.5% from next month).

Are they trying to make NOT buying a house an even more difficult choice?

[Chunketh]

 

As deposit rates are 0 and we are looking at -ve could banks legally charge a "small fee" on positive balances with only a letter or email as notice?

Dont mind either really, the account gets closed either way.

[Saving For a Space Ship]

The Nottingham pulls all mortgages immediately as brokers fear more lenders to follow

https://www.mortgagesolutions.co.uk/news/2020/09/22/the-nottingham-pulls-all-mortgages-immediately-as-brokers-fear-more-lenders-to-follow/

[Chunketh]

 

The Nottingham pulls all mortgages immediately as brokers fear more lenders to follow

https://www.mortgagesolutions.co.uk/news/2020/09/22/the-nottingham-pulls-all-mortgages-immediately-as-brokers-fear-more-lenders-to-follow/

Hmmm slightly suspicious of the rationale.

[Pop321]

 

Hence, subconsciously. If you are getting 10% on your bank savings, you will feel richer (assuming you are a productive member of society and not a debt whore) and therefore more inclined to spend than if you are getting 0.1% or even negative.

You don't have to actually understand anything about economics.

All I know about economics is 'what do you get if you put 10 economists in a room?.....11 opinions'

You are describing the substitution theory and I guess all I am saying is now rates are so low it is impossible to substitute with more savings and it is to encourage yield chasing....keep the DOW pumping. But I appreciate that is one of eleven opinions. 

I still wonder if this rate drop is to support banks who cant compete with 1.16%. It may also allow banks to offer super low mortgage rates and encourage banks to pass on that all important cheap mortgage rate. They won't of course they will try squeeze what little profit they can get.....but no harm in the government hoping. 

[Chunketh]

 

All I know about economics is 'what do you get if you put 10 economists in a room?.....11 opinions'

You are describing the substitution theory and I guess all I am saying is now rates are so low it is impossible to substitute with more savings and it is to encourage yield chasing....keep the DOW pumping. But I appreciate that is one of eleven opinions. 

I still wonder if this rate drop is to support banks who cant compete with 1.16%. It may also allow banks to offer super low mortgage rates and encourage banks to pass on that all important cheap mortgage rate. They won't of course they will try squeeze what little profit they can get.....but no harm in the government hoping. 

Or it is a heads up that NIRP is coming....