27 Sep 20
@wolfgang59 saidInterest rates should be higher and probably would be if nations didn't want to keep forcing investment (even if it risky) and governments themselves did not have to pay interest on the money they borrow.
Good or bad?
How would you like to be paid interest on money you borrow?
https://www.bbc.com/news/business-54314971
28 Sep 20
1 edit
@wolfgang59 saidIt’s a nightmare scenario but won’t happen (at least I doubt it in the UK) because it’s political suicide and unworkable for the reason given in your post. I.e. the banks would never pay interest on money loaned while charging interest on money invested. What has happened is a smash and grab by HMRC on savers yet again.
Good or bad?
How would you like to be paid interest on money you borrow?
https://www.bbc.com/news/business-54314971
The UK’s Treasury’s bank NS&I (National Savings & Investments) shifted its rates very competitively during lockdown attracting billions in migrated funds as investors panicked about independent banks potentially failing and so moved their savings to NS&I which is underpinned by HM Treasury.
Now NS&I has trashed its rates to what is effectively zero % and there is another migration over to fixed interest bonds with the banks (I’ve just opened one myself).
The housing market here has gone bonkers as first-buyers drop out in the wake of low interest mortgages which are impossible to secure and the existing home-owning movers all relocate to be nearer family, the coast and into properties they can work from home in. Stamp duty has been lifted up to £500,000 putting approximately £15,000 into every transaction, but this is going to sellers not to buyers as prices inflate.
It’s a bubble which reminds me of the dot.com situation in the 1990s and if we don’t get a more reasoned approach to managing viruses it will ‘pop’ next spring and send us into a decade/2 decade/generational global recession which will send mental health issues sky rocketing, disinvest social care for the elderly, slash welfare support, drive up crime and dwarf the 150 deaths a week we are currently seeing with COVID-19.
28 Sep 20
I spoke about this about a year ago and most if not all people here considered it not an issue at all that interest rates were practically zero and might cross the 0% line.
However, apparently, a negative interest of has some kind of psychological impact on people where they suddenly consider it a bad thing, but it was already a really, really bad thing when the interest rate was for all intents and purposes 0%.
Have fun living in a society that aims to support the wealthy over the lower and middle class.
28 Sep 20
@great-king-rat saidIf only we had listened to you.
I spoke about this about a year ago and most if not all people here considered it not an issue at all that interest rates were practically zero and might cross the 0% line.
28 Sep 20
@divegeester saidI don’t have any investments but I do have a mortgage so it’s not an issue for me and cheaper borrowing is good for a high spending government.
If only we had listened to you.
Who’s suffering? did I hear the middle class mentioned 😢
28 Sep 20
@divegeester saidIt would make the world a better place, yes.
If only we had listened to you.
28 Sep 20
@divegeester saidIt might be political suicide in most countries, but surely not in Britain, where many people work on the assumption that their primary investment is not savings but property. Anyone with a mortgage will surely be delighted.
It’s a nightmare scenario but won’t happen (at least I doubt it in the UK) because it’s political suicide and unworkable for the reason given in your post. I.e. the banks would never pay interest on money loaned while charging interest on money invested. What has happened is a smash and grab by HMRC on savers yet again.
Low and high interest rates both advantage different sectors of society. Why should the interests of savers be prioritised over those of mortgage holders?
30 Sep 20
2 edits
@teinosuke saidTo your first point; you would think so on the surface of it but it’s not the reality. First time buyers are declining rapidly because although lending rates were already low, the COVID-19 impact on the economy is making lenders nervous. So the property market is overheating temporarily with movers relocating to be with family or simply shifting to better locations at the coast, but chains are collapsing due to flaky sellers not knowing what they want and the first timers not being at the foot of the chain.
It might be political suicide in most countries, but surely not in Britain, where many people work on the assumption that their primary investment is not savings but property. Anyone with a mortgage will surely be delighted.
Low and high interest rates both advantage different sectors of society. Why should the interests of savers be prioritised over those of mortgage holders?
Existing mortgage holders don’t benefit as zero or negative rebates on savings doesn’t translate to borrowing and many borrowers are on fixed rates anyway. Even if you’re on a variable rate of 2% and it drops to 1.5% on a £200k mortgage, this reduction won’t add up to meal out once a month on a 15 year term.
To your second point, they shouldn’t. But it will be politically harmful to start taking money out of those people’s savings who don’t have a mortgage. Despite the UK being the biggest mortgage market in Europe the majority of people in Britain don’t have a mortgage; there are around 11 million mortgages, so probably in the region of 15 million real estate borrowers. Most people own their home or rent and both of these have savings.
Kev mentioned the middle classes but I’m not sure they’ve existed since the 1980s. Let’s call them the wealthy savers; these people will move their money out of negative interest leaving the small savers to bear the brunt. It is even being floated that some people will take their money out as cash and hide it at home!
What’s the point of a cash ISA when there’s no interest to be tax free? Or what’s the point of a stocks ISA when the markets are sagging? I don’t see what the government will gain other than a panic and a lot of increased negativity to go with the tsunami of non COVID19 health issues heading their way. I read today that millions of breast scans have been missed while we stockpile thousands of unused Chinese (what a joke) ventilators in warehouses because they aren’t needed.
30 Sep 20
1 edit
@great-king-rat saidI’m all for higher interest rates, make it happen ratboy.
It would make the world a better place, yes.
30 Sep 20
@divegeester saidThere’s a massive psychological / political difference between losing your house or not being able to borrow money at a low rate due to raised interest rates and having to move your spare cash into investment rather than savings.
I’m all for higher interest rates, make it happen ratboy.
Interest rates as mentioned have hovering around zero for a while now so if your intent on letting your money sit around for little or no return you’d be better keeping it with a local community savings cooperative. Your money will help your community with low to zero interest loans which you can also avail yourself of. The banks have probably got enough money already.
The biggest borrower in the UK is HM Government and they are going to need all the cheap money they can get
30 Sep 20
@divegeester saidHigher interest rates is esssentailly valuing "money" (whatever that is) over "things"
I’m all for higher interest rates, make it happen ratboy.
(goods and services). That would decrease demand and lead to recession. Ratboy?
30 Sep 20
@kevcvs57 saidI don't think the government can borrow from itself at negative rates!
The biggest borrower in the UK is HM Government and they are going to need all the cheap money they can get
However ... the question of foreign investors borrowing from British banks
on negative or near negative mortgage interest rates is a good one.
30 Sep 20
@great-king-rat saidJapan, Switzerland, Sweden are all on negative rates.
It would make the world a better place, yes.
30 Sep 20
@wolfgang59 said“ LONDON (Reuters) - Britain sold a government bond with a negative yield for the first time on Wednesday, meaning the government is effectively being rewarded for borrowing after investors agreed to be repaid slightly less than they lent.
I don't think the government can borrow from itself at negative rates!
However ... the question of foreign investors borrowing from British banks
on negative or near negative mortgage interest rates is a good one.
It joins Japan, Germany and some other European countries in selling debt yielding less than 0%, reflecting the prospect the coronavirus pandemic will cause a severe global recession and bond-buying by central banks to mitigate its impact.
Wednesday’s auction saw 3.75 billion pounds of gilts maturing in July 2023 sold at an average yield of -0.003%.“
Looks like cheap money to me, government gilts is government borrowing. Hard to get this kind of deal with high domestic interest rates.
Either way it’s a smart move for the future of government spending I would think.