Bank of England : Rate Drop!

starfighter, you don't have to be 'rich' to have savings, and hence being annoyed at the recent rate drops, I've got modest savings, I earn pretty much exactly the average wage, I'm most definately not 'rich' by any stretch of the imagination. But I don't have any debt (well Student overdraft at £1000 still, paying it off slowly as no interest whilst my savings actually do get some interest), so interest rate drops have a bad affect on my financial situation, if not an overly concerning/damaging one...

scorza said:
Ah but we have "real deflation" atm (using the same criteria by which we had 10% real inflation not so long ago) so he's not losing money at all. You've answered your second point yourself - the government expect people to spend what they'd otherwise save.
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Just curious, what measures are these (not saying you're wrong, just curious).

Looking at the last inflation report (CPI 4.1, RPI 3.9) it seems fuel/transport costs were the main thing reducing (9.3p off a litre of unleaded in 3 months apparantly, but since then there's been what 2-3p?) whilst the cost of food seems to have universally risen.

Looking at the basic picture it really doesn't look like we'll be hitting 'actual' deflation imo (eg CPI/RPI figures), Fuel isn't going to drop much more (in fact if the dollar starts crumbling like it might do the oil might go back up as people go from currencies to commodities once again) and food will continue to rise, even RPI which gets the benefits of mortgage interest payments being slashed only has a limited range for that to go down anymore...

nokinidea said:
If you have any savings at all, from what I've been reading about the ecomomy and what's going on, you need to buy lots of gold with it and get rid of your "paper" money as it isn't worth the ink written on it.
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gold isn't completely safe either, it's not unprecedented even for governments to confiscate the publically owned gold (USA did it), even if that happened in another country that would severely damage the price of the gold, on the other hand as above if the dollar starts to show some weakness we could see a mad rush to commodities that would see gold and lots of other things shoot up in value, but like all of that it's a gamble and could go either way.
 
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SKILL said:
Just curious, what measures are these (not saying you're wrong, just curious).

Looking at the last inflation report (CPI 4.1, RPI 3.9) it seems fuel/transport costs were the main thing reducing (9.3p off a litre of unleaded in 3 months apparantly, but since then there's been what 2-3p?) whilst the cost of food seems to have universally risen.
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Was called the real cost of living index or some other such nonsense from the doom and gloom media (Daily Mail or Telegraph I think). Plenty of the usual doom and gloomers here were using to to justify why interest rates should be going up (when they were like 5%) instead of down (in all seriousness too!). The main gist of it was that food and fuel inflation was the only inflation that mattered (the only other thing we spend our money on was consumer electronics from the Far East it would appear).

I think food prices (wheat, barley etc) have already dropped, but it takes a while for this to filter through into consumer food. Gas prices are set to drop too - although that was before Russia cut off gas to Europe. Due to the nature of inflation indexes this was adding up to a looming CPI/RPI deflation problem. Who knows eh? perhaps Russia has actually done our economy a favour if stable or rising gas prices ward off deflation. It would be enough to make Putin choke on his cornflakes :p
 
gold isn't completely safe either, it's not unprecedented even for governments to confiscate the publically owned gold (USA did it), even if that happened in another country that would severely damage the price of the gold, on the other hand as above if the dollar starts to show some weakness we could see a mad rush to commodities that would see gold and lots of other things shoot up in value, but like all of that it's a gamble and could go either way.
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Not completely safe I know, I don't really think anything is but if it all REALLY hits the fan, paper money will become worthless as it's made up of nothing (in the most part) the ONLY thing left to barter with will be the precious metals..
Silver might be a slightly better bet though, dunno.
 
Will be interesting to see what the CPI/RPI will be at the end of the month, more so to see if the rate in which it's decreasing is higher/lower...

Oil is probably a good bet right now (imo), was $42 earlier I think, has hit $38 ish, can't see any reason why in ~5 years time it won't be $80 or more really, although in the short term it might drop slightly, so depends if you can tie up your money for 'as long as it takes'
 
SKILL said:
gold isn't completely safe either, it's not unprecedented even for governments to confiscate the publically owned gold (USA did it),
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There's no way to prove you own any gold unless it's stored somewhere on record. So it would be a virtual impossibility in the 21st century.
 
thepharcyde said:
I heard the other day that Nationwide said that they will not be passing on anymore drops to 'some' tracker mortgage holders.

Anyone know whos affected. I renewed my mortgage with them in Dec 07 at 8bps above base rate so will be paying 1.58% if they pass this on.

Talk of the base rate dropping to zero by the end of the year!!!!
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Don't know if this link helps... Google News Article

Best thing to do is check the small print of your contract and see whether they can introduce a collar on your mortgage rate.
 
SKILL said:
Will be interesting to see what the CPI/RPI will be at the end of the month, more so to see if the rate in which it's decreasing is higher/lower...

Oil is probably a good bet right now (imo), was $42 earlier I think, has hit $38 ish, can't see any reason why in ~5 years time it won't be $80 or more really, although in the short term it might drop slightly, so depends if you can tie up your money for 'as long as it takes'
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I'd be careful of that, if One of those middle eastern states manages to set up a trading post in it's own country that doesn't deal in dollars it will be a free for all.. but the likelihood of that happening, hmmm slim to non existent at best. :D

The last time they tried to set that up miraculously 2 planes flew into 2 towers the next day and then we are at war with them... Hmmmm
 
Energize said:
There's no way to prove you own any gold unless it's stored somewhere on record. So it would be a virtual impossibility in the 21st century.
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Yes, but if the government ban public ownership, how are you going to trade in it? The market value will plummet...
 
Dolph said:
Yes, but if the government ban public ownership, how are you going to trade in it? The market value will plummet...
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Trade it in another country, or illegally.

As soon as the ban is lifted the value will stabalise again.
 
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Energize said:
Trade it in another country, or illegally.
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Which will not deal with the fact that it's worth less... Gold, as with many commodities, is driven in part by speculators/investors. Look what happened to oil prices when the speculators stopped speculating on oil because they weren't sure they'd be able to sell it and might actually have to take delivery of what they've been sitting on...
 
nokinidea said:
I'd be careful of that, if One of those middle eastern states manages to set up a trading post in it's own country that doesn't deal in dollars it will be a free for all.. but the likelihood of that happening, hmmm slim to non existent at best. :D

The last time they tried to set that up miraculously 2 planes flew into 2 towers the next day and then we are at war with them... Hmmmm
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Think I need a tin foil hat just reading that :p

Yeah, it's a gamble, like all the commodities, but currently it's the one I'd go for if I had to :)
 
Interesting times, with savings rates being slashed, and (mortgage) credit being so cheap, it seems the only way to battle inflation may be for me to go out and spend some of my cash, and take advantage of some of the sales while I can.

It's actually got to the point now where I can't be bothered shifting my savings around, as the gains are fairly minimal, and (fixed accounts aside) you can never be quite sure how long a product will be near the top of the pile.

Say you have £10k and shift that to another account paying 0.5% more interest. Even assuming the difference in rates remains static, that's only an extra £50 a year. Take off the tax and it's £40. Factor in the amount of hassle/effort involved in researching/setting up the account, and I might just about be earning minimum wage.

I wonder if the current situation will have this kind of effect on other people still in work? By which I mean, say you've got people with secure jobs, who've seen their outgoings drop off heavily over the last 6-12 months (mortgage payments and petrol), meanwhile their savings are taking a hammering and yet inflation is pretty high. Why not go out and splash the cash?
 
Duke said:
******* great. Shafted for saving properly for a house deposit.
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To be honest, it's not really the savings rate which will get you a sizeable deposit, it's more what capital you can put into it yourself.

E.g. say you've got £20k stashed away. Even at 5% net interest, that's only gaining you £100 a year. You're not going to massively increase your pot like that, even 5 years down the line it'll only have grown by around £525. Obviously you'd plan on putting more away as time goes by, and getting slightly more interest, but I doubt that the rate cut will have that big an impact on people's ability to save up a deposit.

In fact, I'd wager that saving for a house deposit is far, far easier than it was 6-9 months ago (after the high LTV deals came off the market/got very expensive), due to the fact that average house prices are way down. Couple this with the stamp duty threshold going up to £175k, and the VAT cut (payable on quite a few of the fees associated with buying a house), and the fact that mortgate rates are coming down, and you've probably never had it so good in terms of housing affordability in recent years.

The only problem really would be for people aiming for a high LTV, but to be honest, those type of deals started drying up long before the recent big interest rate cuts.
 
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Nice, my gran get's screwed out of the interest on her life savings again. She was already £70 down a month from the last rate change. Is Gordon hoping enough pensioners die off this winter to give his budget figures a boost.
 
Duke said:
******* great. Shafted for saving properly for a house deposit.
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I assume its only a deposit not 100% cash so at some point you will need a mortgage to go with it.... I rather go with the low interest on the savings than an awesome saving rate but subsequently a much higher mortgage.
 
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