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Good for borrowers BUT

Community Veteran
Posts: 38,246
Thanks: 934
Fixes: 56
Registered: 15-06-2007

Good for borrowers BUT

Really bad for savers and people relying on interest to live on.
This means that with the current rate of inflation savings will effectively shrink
http://news.bbc.co.uk/1/hi/business/7716086.stm
5 REPLIES
Thunderclap
Grafter
Posts: 673
Registered: 08-09-2008

Re: Good for borrowers BUT

Interesting paradox here.
In the old days, banks used savers attracted by high interest rates to underwrite their loans. Then, along derivatives, packages of 'good debt' that banks could use instead to underwrite their loans. There were a lot of derivatives and they were cheap. And the more 'security' the banks brought, the more they could loan, so the more money they could make. And the more money they made, the more derivatives they could buy. And then the derivatives turned out to be worthless pieces of crp! Which was the reason behind the collapse of the 'twin towers' that were RBS and HBOS. So one would think that banks would be turning back to old fashioned savers as security.
Think again.
It is now the tax payer who underwrites the banks. Which gives banks an even greater incentive to dump their savers.
"Only the foolish are prudent."
Community Veteran
Posts: 6,735
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Registered: 02-02-2008

Re: Good for borrowers BUT

Quote from: Oldjim
This means that with the current rate of inflation savings will effectively shrink

Unlikely.
It seems that inflation is about to nose-dive hence the Old Lady of Threadneedle Street is more than happy to drop base rate.
Community Veteran
Posts: 38,246
Thanks: 934
Fixes: 56
Registered: 15-06-2007

Re: Good for borrowers BUT

Quote from: HPsauce
It seems that inflation is about to nose-dive hence the Old Lady of Threadneedle Street is more than happy to drop base rate.
Wishful thinking I am afraid
Community Veteran
Posts: 6,735
Thanks: 12
Registered: 02-02-2008

Re: Good for borrowers BUT

We'll see I guess.
Also savings rates aren't coming down that fast; I've just had an email of revised rates and they're still over 6% for 1, 2 and 3 year bonds.
Community Veteran
Posts: 38,246
Thanks: 934
Fixes: 56
Registered: 15-06-2007

Re: Good for borrowers BUT

I know - I just jumped into one but they will be pulled pretty quickly http://www.moneysavingexpert.com/savings/fixed-rate-savings