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Or inflation as well? With recession, isn't our money effectively worth less?
Whats happing to the economy?
- Thread starter Conrad11
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interest rates are already below real inflation so savers like me are losing money everyday
Associate
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Should go up eventually, it the banks aren't lending to each other any more, they'll need to get the money from somewhere.
Soldato
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Yeah the real value will fall. Having said that, interest rates would normally go up to try and curb spending and counter the inflation, which offsets the effect somewhat.
What makes this period a little tricky is that inflation is going up yet demand is struggling. Much of the inflation can be put down to oil prices going up, although I seem to remember a poor crop being partly responsible for food prices going up, along with increased costs of transportation. The demand jitters stem from the credit crunch, house prices struggling and people tightening their belts as they've realised the economy is entering a downturn. Right now, it would seem logical to lower interest rates to attempt to boost demand. Unfortunately this would ordinarily increase inflation as well, which would be a bad idea. With much of the inflation being caused by price inelastic factors, however, this might not actually be of too great a concern. I certainly wouldn't want to be on the MPC right now, though, they have some tricky decisions to make.
Soldato
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interest rates are already below real inflation so savers like me are losing money everyday
What is your measure of real inflation? Even the more accurate RPI is around 4% is it not? Your savings must be in a pretty poor account if you're losing money on that...
RPI was always a fudge and CPI is beyond a joke - real inflation as in what i buy each week - food and energy - not ipods or diamond rings (both in the CPI)
I seem to remember reading that according to the technical definition of a recession, both us and the US are currently in recession. I'm just glad I get on well enough with my parents to stay put for a while, tbh
Neither is, neither country has had two successive quarters of negative growth...
Soldato
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CPI is a joke, but any inflation measure would be pointless if it merely included food and energy as you seem to suggest.
interest rates are already below real inflation so savers like me are losing money everyday
Since when is inflation above the 6.5% rate seen on isa's or the 7.4% rate seen on fixed term accounts?
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All of the first 35k, and a certain % of the rest.
my inflation is more than that - have you seen the price of food!! some of my stuff is up 30% minimum. Cheese (tesco standard) went up 47% recently!
my inflation is about 8-10% and i suspect a lot of peoples is even more.
I can't tell if you're being sarcastic or not!
Unless I've made a big mistake then mathematically what I've done makes sense because if I paid off all of my debt from the sale of my house and then took a capital and repayment mortgage for almost the full value of the new property I would have also been reducing the loan on the property but after the initial five years were up I would only have paid off around £6,500.
By keeping on my personal loan and paying that for the next five years along with an interest only mortgage the monthly cost is almost exactly the same as the capital and repayment option but at the end of the five year period I'm still debt free and have paid off £14,000 of the value of the house.
But aside from all that what I'm doing is different from renting in that throughout the initial five year period I'll have been gaining equity in my property whereas if I was only paying rent I would be just paying money out with no return.
We're moving house at the moment too and it's a nightmare with the mortgage rates. Just before we applied for our mortgage deal is was 5.99% fixed for 3yrs which went down when we applied to 5.79% and we were offered that and accepted it, that house purchase fell through so we started looking for a new house. I sent off new property information and payment for the survey on our next house on the 29th, it still hasn't been recieved by our lender, apparently.
Today our lenders website is advertising new rates of 7.39% for the same deal + about double the arrangement fee.
As our initial rates are no longer available I'm hoping (big time) that they will still honour that deal for 3 months, can't get through to them on the phone though to clarify it as I'd imagine many are panicking.
Happy days.
Today our lenders website is advertising new rates of 7.39% for the same deal + about double the arrangement fee.
As our initial rates are no longer available I'm hoping (big time) that they will still honour that deal for 3 months, can't get through to them on the phone though to clarify it as I'd imagine many are panicking.
Happy days.
Soldato
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I feel for you, responsible people like yourself are being skanked by the irresponsible lending practices that have happening over the last 8 years.
This 'you must buy now or be priced out forever' attitude has led to people taking out ridiculous multiples or even lieing. I heard on Sky news earlier the editor of Fool.co.uk thinks you need a minimum of 80% equity/deposit to secure any kind of sensible rate now.
Thing is IF you have been sensible and seen through all that 'buy now or you will never have a house' rubbish then you're on a winner, its only in the last 6 years that house prices have become ridiculous, only a matter of time before the prices are corrected.
Prudence always win through.
Only an idiot thinks that the house prices that we have seen in the last 6 years are healthy, no one benefits. Sadly the majority of the population only see as far as the end of their noses.
And only an idiot thinks a house price crash happens in isolation and makes people better off... Prices crash because there's no demand, there's a reason why there's no demand, because people can't afford to move.
How is that being onto a 'winner'?