Inflation and interest rates

It would be nice to think that interest on savings accounts would rise wouldn’t it?

But I won’t hold my breath.

Only advice I have is to keep looking at the savings accounts rates online and see if any rise, then maybe move any savings you have.

All my life I have been on the wrong side of interest rates. When we had a mortgage the rates were high, and when we could finally afford to save they were virtually nil.

Part of me would like to see them rise, but then I think about young people starting out and don't wish high rates on them on top of everything else.

I agree, Doodledog, and remember how tough life was when our mortgage rate went to 15%. For years we told our AC to keep such rates in mind and we’re met with unbelieving laughter. We’ll see.

What you can do online but it is fiddly is to open multiple accounts to gain a fair bit of interest. The problem being is that with some accounts only £150 a month is the max to be saved and the original deposit may be as low as £500. Tesco bank for example looks promising.

I am against fixed rates because I am certain rates will rise and banks will eventually raise their rates if not by much.

I recently was offered 3% by the Coventry Building Society as a "valued customer" ? I jumped at the chance.

I can remember back in 1989 receiving 17% from a government bond. I'm unlikely to see that rate again, am I?

Keep checking on Money Saving Expert, Martin Lewis’s website for the latest rates. I feel there will be more rate rises so I am not in a rush to fix yet.

One way to control inflation is to raise interest rates, so people need to spend more money servicing their loans and will be disinclined to borrow more.

How borrowing companies respond to interst changes is the next question - and they are a world of thir own.

Personally, I would be inclined to keep fluid at the moment as we have had a run of quite exceptional low interest and rates are now rising.

Esspee

I recently was offered 3% by the Coventry Building Society as a "valued customer" ? I jumped at the chance.

I can remember back in 1989 receiving 17% from a government bond. I'm unlikely to see that rate again, am I?

They haven't offered me anything, perhaps I'm not valued!

Mind you, I don't have much in there any more.

I took a chance wit a stocks and shares ISA which has performed much better than my savings account but is always a risk.

Mine is plummeting. I can't decide whether to move it to somewhere safer, but selling at the bottom of the market is foolish. I've had it for years, and it's just about at break-even point now. Even a low interest cash account would have done better. OTOH, by keeping it open and topping up the balance each month if and when S&S do start to rise it should go up pretty sharply.

My stocks and shares did go down a little while back but has recovered and is back to where it was.
I have sometimes been tempted to sell but glad I didn't.

Doodledog

All my life I have been on the wrong side of interest rates. When we had a mortgage the rates were high, and when we could finally afford to save they were virtually nil.

Part of me would like to see them rise, but then I think about young people starting out and don't wish high rates on them on top of everything else.

Yep!

I remember for our last but one house, having over-stretched ourselves as we had to move fast- the interest rate went up to 19.5%! And now I have a few bits of savings is a big fat more or less zero, zilch, nothing.

Yes, I'll probably hang onto it. It was worth a lot more before Brexit, and has gone up and down ever since. I realise that the losses are on paper, as it hasn't fallen to below the amount invested, but after all this time it should be worth more than it is.

They haven’t offered me anything either, Callistemon - if I’m
not regarded as a valued customer I don’t know who is!! Care to join me in a protest? Your place or mine?

M0nica

One way to control inflation is to raise interest rates, so people need to spend more money servicing their loans and will be disinclined to borrow more.

How borrowing companies respond to interst changes is the next question - and they are a world of thir own.

Personally, I would be inclined to keep fluid at the moment as we have had a run of quite exceptional low interest and rates are now rising.

That only works if there is too much money in circulation. At the moment, the UK has the opposite situation - or, at least, those of the bottom have too little money. The only people who will benefit are the wealthiest, who are the ones lending the money and receiving higher interest rates.

Growstuff, between those at the bottom of society and in poverty and the 'wealthiest, there are millions and millions of households, with gradually rising incomes and varying amounts of savings. www.nimblefins.co.uk/savings-accounts/average-household-savings-uk Many retired people have savings in building societies and similar organisations. These will all benefit from rising interest rates.

The wealthiest will benefit least, because they, generally , do not have savings accounts. There money is invested in stocks, shares and other more sophisticated investment products.

Greyduster

They haven’t offered me anything either, Callistemon - if I’m
not regarded as a valued customer I don’t know who is!! Care to join me in a protest? Your place or mine?

I don't think I have much in there now, it could be a dormant account!

But I'm happy to join you for a sit-in until they offer us 4%

I am one of their valued customers and I had totally forgotten I had any money there at all so it will not be much.

M0nica

*Growstuff*, between those at the bottom of society and in poverty and the 'wealthiest, there are millions and millions of households, with gradually rising incomes and varying amounts of savings. www.nimblefins.co.uk/savings-accounts/average-household-savings-uk Many retired people have savings in building societies and similar organisations. These will all benefit from rising interest rates.

The wealthiest will benefit least, because they, generally , do not have savings accounts. There money is invested in stocks, shares and other more sophisticated investment products.

I disagree. The wealthiest don't invest their money in ordinary savings accounts, as you say. They will benefit because asset values are continuing to rise.

The poorest often don't have any savings, have big mortgages and have been forced into debt to pay essential bills.

Retired people are, on average, wealthier than working people in today's Britain.

According to the figures on M0nica's link, the people with the highest wealth, income and savings are aged 60-65, so not of (state) retirement age. All but the youngest groups have median average savings into thousands, and whereas no average calculations are representative of everyone, the figures do back up M0nica's point that there is a huge variation between those at the very bottom and those with most.

It is good that they show figures in median averages rather than mean averages, which are largely meaningless because billionaires can cancel out large numbers of people with little or no savings, whereas median averages are more representative.

I have no idea how to work out the value of a final salary pension as a total 'pot' figure for purposes of comparison. Is there a formula?

M0nica

*Growstuff*, between those at the bottom of society and in poverty and the 'wealthiest, there are millions and millions of households, with gradually rising incomes and varying amounts of savings. www.nimblefins.co.uk/savings-accounts/average-household-savings-uk Many retired people have savings in building societies and similar organisations. These will all benefit from rising interest rates.

The wealthiest will benefit least, because they, generally , do not have savings accounts. There money is invested in stocks, shares and other more sophisticated investment products.

M0nica is correct, I think.

Generally, stock and share decline in value as interest rises, because people can earn more at interest in savings.

Doodledog: "I have no idea how to work out the value of a final salary pension as a total 'pot' figure for purposes of comparison. Is there a formula?"

There is, but with so many variables. The easiest, to me, is average life expectancy (age in yrs, thus yrs past retirement) multiply by sum of pension with adds for inflation as dictated.

Norah

*Doodledog*: "I have no idea how to work out the value of a final salary pension as a total 'pot' figure for purposes of comparison. Is there a formula?"

There is, but with so many variables. The easiest, to me, is average life expectancy (age in yrs, thus yrs past retirement) multiply by sum of pension with adds for inflation as dictated.

So if we assume an average lifespan of 80 years, a 65 year old with a FS pension of £10k pa would have a hypothetical pension pot of £150k? That seems quite low, compared to figures quoted for money purchase schemes.

Doodledog

Norah

Doodledog: "I have no idea how to work out the value of a final salary pension as a total 'pot' figure for purposes of comparison. Is there a formula?"

There is, but with so many variables. The easiest, to me, is average life expectancy (age in yrs, thus yrs past retirement) multiply by sum of pension with adds for inflation as dictated.

So if we assume an average lifespan of 80 years, a 65 year old with a FS pension of £10k pa would have a hypothetical pension pot of £150k? That seems quite low, compared to figures quoted for money purchase schemes.

That seems low to me as well, but there are the inflation adds and the compounding. Perhaps that is the reason?