The rising cost of living

[tinker]

18 minutes ago, CVByrne said:

You seem obsessed with Banks for some reason. I assume it was because of the 2008 financial crisis which was a banking crisis.

This is a cost of living problem. The Bank of England sets the interest rates and loans to the Banks and they loan to people for mortgages. So when the interest rate goes up from the Bank of England the interest rate goes up for the banks AND the people and companies they loan to. 

It's not like the banks themselves are just raising interest rates and just pocketing it all. That's not how it works. Banks are funded by loans from the central bank. When the interest rate on their loans goes up they pass on the increase in to customers.

 

I had a mortgage rate that was 0.29% above the bank of England rate 8 years ago, no bank would get that close to it now, why? The banks, like the water companies, energy companies,  supermarkets are all greedy.

[Panto_Villan]

31 minutes ago, CVByrne said:

Fair point in relation to inflation, it's not that it will make a difference for those people to the overall inflation. It was more in relation to income tax increases instead of interest rate increases means they take zero burden at all. They're basically exempt from any pain.

Also the 30% or whatever of people who own homes as a group are already the better off people in society as they own a leveraged asset that increases in value over time. So mortgage increases while painful is not like rent increases for people who have no assets. 

Ah, I see your point. Yes, tax rises would affect the 1% even less than interest rate rises. But if that bothered you you could bring in specific rules to counterbalance that I guess.

Regarding the second paragraph, you’ve missed my point a bit. Something like 65% of households own a house, but only half of them have a mortgage on it. At best you’re hitting the middle 33% of society with interest rate rises (and in reality the bottom third just get hit with rent rises too, because landlords probably do have mortgages on their properties).

Edited June 22, 2023 by Panto_Villan

[bickster]

51 minutes ago, CVByrne said:

You seem obsessed with Banks for some reason. I assume it was because of the 2008 financial crisis which was a banking crisis.

This is a cost of living problem. The Bank of England sets the interest rates and loans to the Banks and they loan to people for mortgages. So when the interest rate goes up from the Bank of England the interest rate goes up for the banks AND the people and companies they loan to. 

It's not like the banks themselves are just raising interest rates and just pocketing it all. That's not how it works. Banks are funded by loans from the central bank. When the interest rate on their loans goes up they pass on the increase in to customers.

 

So answer this for me, when the BoE raises interest rates, the bank put up their lending rates accordingly but why don’t they put up their savings rates by a similar amount?

[KentVillan]

Just now, bickster said:

So answer this for me, when the BoE raises interest rates, the bank put up their lending rates accordingly but why don’t they put up their savings rates by a similar amount?

Because the spread between those rates is how banks make money.

In theory, if they take the piss too much then it should create opportunities for competition, but unfortunately that takes time to materialise.

I think this is an area where there is a strong argument for govt intervention to force banks to bring deposit rates closer to BoE base rate (Martin Lewis has been making this case) because the taxpayer bailed out the banks in 07/08.

But will probably pay out much like the energy crisis profiteering.

[bickster]

 

5 minutes ago, KentVillan said:

Because the spread between those rates is how banks make money.

In theory, if they take the piss too much then it should create opportunities for competition, but unfortunately that takes time to materialise.

I think this is an area where there is a strong argument for govt intervention to force banks to bring deposit rates closer to BoE base rate (Martin Lewis has been making this case) because the taxpayer bailed out the banks in 07/08.

But will probably pay out much like the energy crisis profiteering.

Yes that’s kinda why I was asking and from what you’ve said, the banks are making increased margins as they aren’t passing on the rises to savers

[KentVillan]

1 minute ago, bickster said:

 

Yes that’s kinda why I was asking and from what you’ve said, the banks are making increased margins as they aren’t passing on the rises to savers

Correct, but unfortunately there's nothing obliging them to offer better rates, apart from market pressures. If their competitors started offering better rates, and they started losing depositors, then they would shift... but it's probably a cartel.

[bickster]

Just now, KentVillan said:

Correct, but unfortunately there's nothing obliging them to offer better rates, apart from market pressures. If their competitors started offering better rates, and they started losing depositors, then they would shift... but it's probably a cartel.

Yes it’s very similar to petrol at the minute. The idea that the market sorts itself out is proving to be utter nonsense

[KentVillan]

1 minute ago, bickster said:

Yes it’s very similar to petrol at the minute. The idea that the market sorts itself out is proving to be utter nonsense

I think in the long run the market probably does sort itself out, but when you have these very sudden impacts and not a lot of scope for competition to emerge in the short term, the established players just take advantage.

There's definitely a case for the govt stepping in here to say, look we get you need to make a profit on this, but you've had a lot of support from the taxpayer over the past 15 years, and we're going to set some thresholds here so you can still make a profit, but at least give people a chance to make some money from their savings.

Unfortunately, though, until BoE base rate exceeds inflation (as is the case in the US atm), there's no way banks will offer savings that beat inflation. So really that is the main problem.

[CVByrne]

47 minutes ago, bickster said:

So answer this for me, when the BoE raises interest rates, the bank put up their lending rates accordingly but why don’t they put up their savings rates by a similar amount?

Banks used to rely mainly on deposits to loan out for mortgages. That system essentially ended and Banks get loans from the central bank now to fund their loans to customers.

People use money market funds now via their bank to get the savings rates on offer by BoE. Basically you save your money with the government and get the interest rate and the bank facilitates that. General public just don't know you can avail of these things. 

Banks would increase the rates offered though if people actually moved their money out to shop for better rates or enough people put into money market funds but they aren't moving their money elsewhere in any volume for banks to do this.

Edited June 22, 2023 by CVByrne

[CVByrne]

17 minutes ago, bickster said:

Yes it’s very similar to petrol at the minute. The idea that the market sorts itself out is proving to be utter nonsense

Definitely companies taking advantage alright. Across the board. Quick to raise the prices when their costs go up and not dropping those prices when their costs go down. 

[CVByrne]

15 minutes ago, KentVillan said:

I think in the long run the market probably does sort itself out, but when you have these very sudden impacts and not a lot of scope for competition to emerge in the short term, the established players just take advantage.

There's definitely a case for the govt stepping in here to say, look we get you need to make a profit on this, but you've had a lot of support from the taxpayer over the past 15 years, and we're going to set some thresholds here so you can still make a profit, but at least give people a chance to make some money from their savings.

Unfortunately, though, until BoE base rate exceeds inflation (as is the case in the US atm), there's no way banks will offer savings that beat inflation. So really that is the main problem.

Government don't need to do anything other than educate people. You can go get 5% interest from the actual government by saving with them via a money Market fund. The government are safer place to save your money than any bank. People just need to do that in a large enough number moving money out of these low interest bank accounts and the Banks will react by raising the rates. 

With Petrol though people have no choice. We are forced to buy fuel and have no other options.

[CVByrne]

Note. The government won't educate people about the above though as Banks get taxed at an incredibly high rate in UK. Is like 45% in total so Government make a lot in tax receipts from Banks. Plus we own NatWest still so Gov get essentially all of the profits there. 

They need the tax to pay the interest on the government debt. So they want people having low savings rates in banks. 

[KentVillan]

16 minutes ago, CVByrne said:

Government don't need to do anything other than educate people. You can go get 5% interest from the actual government by saving with them via a money Market fund. The government are safer place to save your money than any bank. People just need to do that in a large enough number moving money out of these low interest bank accounts and the Banks will react by raising the rates. 

With Petrol though people have no choice. We are forced to buy fuel and have no other options.

Do you really think it's an education problem, though? What's the mass market vehicle for ordinary savers to invest in money market funds? S&S ISA?

[Demitri_C]

One bit of good news my gas and electric has gone down about £200

[CVByrne]

7 hours ago, KentVillan said:

Do you really think it's an education problem, though? What's the mass market vehicle for ordinary savers to invest in money market funds? S&S ISA?

It's different now than it was years ago. You have them available though your bank account under investing products. I told a friend to not pay down extra on his mortgage and just save with a money market fund and he had one within 2 days and saves in there. 

[Mozzavfc]

11 hours ago, CVByrne said:

I hope all the Brexiteers suffer the most. They all need to know there was consequences we all suffer for their stupidity. 

It's nonsense though to put the whole inflation blame as if it's solely down to Brexit. The primary cause for the UK having higher inflation than other G7 countries however is down to Brexit factors. 

The othe three factors are driving inflation here as much as elsewhere. 

Unfortunately Brexit voters were mainly older non-mortgage, triple lock pension retirees. It'll effect them at lot less than younger people who are more likely to have big mortgages or in rentals

[CVByrne]

I just checked the savings rates with my bank and they offer a 5% savings rate. I thought they were still offering low rates. Seems like they have caught up a lot with the money market fund rates. 

[Genie]

15 minutes ago, Mozzavfc said:

Unfortunately Brexit voters were mainly older non-mortgage, triple lock pension retirees. It'll effect them at lot less than younger people who are more likely to have big mortgages or in rentals

In my experience a lot of Brexiteers are younger tradesmen types. I reckon a massive proportion of tradesmen voted leave to get rid of the Eastern European competition they had for work. 

[Genie]

1 hour ago, CVByrne said:

I just checked the savings rates with my bank and they offer a 5% savings rate. I thought they were still offering low rates. Seems like they have caught up a lot with the money market fund rates. 

Chase have passed on the full half percent immediately too. Their fully flexible savings pot pays 3.8%. Not sure about specific savings accounts though. They pay 5% on “round up” too. 

The traditional high street banks will do the usual of sending out emails within minutes of the rate rise telling people their mortgage payments are going up, but not talking about savings for a long time.

Edited June 23, 2023 by Genie

[cheltenham_villa]

10 hours ago, tinker said:

I had a mortgage rate that was 0.29% above the bank of England rate 8 years ago, no bank would get that close to it now, why? The banks, like the water companies, energy companies,  supermarkets are all greedy.

others have probably gone onto explain but the reason such low rates were achieved was because of the low rate environment. With base rates so low and money so cheaply available the banks had to earn money through volume. It was near impossible to make any money from savings so banks were forced to be really competitive to stay in business. With the increased rates banks are now earning c1-2% on savings products and about the same on mortgages. Now you can now may the same money by selling one mortgage as you would have done selling 4 or 5 8 years ago.

Banks also have a limit on how much they can actually lend, you cant be a tiny bank and borrow an unlimited amount of money. This means banks are now being selective about which mortgages they lend. You wouldnt want to do all of your lending at low rates because as rates move you have less ability to lend products at higher rates.

As you say, they are greedy. This is because they are private business' with shareholders and want to make as much money as possible.