New Home Owners And Snagging Forum

Investments => Cash ISAs and saving accounts => Topic started by: The Prophet on August 19, 2013, 02:14:04 pm

Title: Low interest rates hurt savers and give peace of mind to the reckless
Post by: The Prophet on August 19, 2013, 02:14:04 pm
The Bank of England base rate has now been frozen for more than four years at 0.5%.
Mark Carney, the new governor of the BoE, has made it clear that interest rates will be unlikely to be raised any time soon. 
Indeed he indicated that the first rate rise may not be until 2016.

Borrowers have never had it so good.
Historically low interest rates and confirmation they are unlikely to be raised in the near future.
The same can not be said for savers, many of whom rely on interest from their savings to live on.
They are being hit by a double-whammy.
Ridiculously low rock bottom interest rates and a policy that allows inflation to remain above the 2% target.
Even the lower inflation measure the CPI is currently 2,9% and the RPI the real measure of inflation is currently at 3.3%.

That may not sound much but even inflation at this rate will hurt your finances.
For example a £50,000 lump sum earning 0.5% interest tax-free with steady inflation at 2.5% would be worth £40,000 in today's money in ten years - 20% less than it is today.

The world-wide monetary policy that allows wealth to be confiscated by allowing inflation and manipulation of rates is nothing short of state-endorsed theft.