to think savings will be worthless?

[HopelessLayout]

So governments are printing money hand over fist to cover all the Covid bailouts. Isn't this going to cause hyperinflation when it is all over?
I have modest savings put away for my retirement in a few years' time, but perhaps I should just blow the lot now.

Please tell me if I am misunderstanding the situation.

The benefit to fixed rate mortgages is knowing exactly what you're going to be paying for a particular period. We're still on our first one and chose it for precisely that reason. The way we viewed it was, we were happy to pay more for that certainty while the LTV was at its highest. I think that's probably the main reason people choose to go for them. Equally I know people who are happier with the tracker because it was likely to cost them less overall.

The Federal Reserve (a private bank, not a branch of the US Federal Government) is giving a very sober forecast for the next few years, at the very least. Any investment should take a very long term view. The world economy will be very different on the other side of this.

www.newyorker.com/news/our-columnists/whos-right-about-the-economy-jared-kushner-or-the-chairman-of-the-federal-reserve

Good advice from people above including MrsMum. Do not gamble any money you cannot afford to lose. 25% pf people in the UK have no savings and many others can hardly afford each month's childcare and rent costs. Those with spare money need a big cash cushion even if it is going down by inflation each month just in case and have it on instant access., The pay off all your debt of all kinds in my view (and sort out a pension if you have employer contributions and if that makes sense for you). Only after that think about where you might put a lot of money and spread it out - traditionally a third in cash, third in property, third in shares.

On the mortgage point younger people should avoid long fixes because they marry, move in with someone, move for work etc and the penalties of getting out of it are high. However we certainly have low rates currently - remembering when we took out a 10 year 13% fix which was cheaper than our home mortgage in the 1980s... that obviously was a bad choice! Interest rates went right down to about 8% so we rushed to put every spare penny into paying off that loan.

Also things go wrong in life and if every penny is locked away or awaiting a stock market up turn even if you are getting more on it than having £30k cash in the bank it may not be as wise.

You can get a special overpayment mortgage which works by instead of getting little return off your savings you use them to overpay your mortgage but you can access the savings anytime but can cut years off your mortgage by doing this.Anyone with a mortgage and savings might want to look at this as I had one for a few years and cut around 5 years off my mortgage a few years ago.
I think lots of companys do them it might be worth googling overpayment mortgages for anyone in this situation as it worked well for me.
I am lucky to no longer have a mortgage now and some modest savings.
On that note nobody should accept 0.05 % interest I have an easy access account with Marcus and Ford money which both pay around 1.2 % and were opened online and easy to manage.I also have a 5% account with M and S bank but it is linked to my current account and limited to £250 a month but can still build to £3000 in a year and then reopen again the next year which is better than nothing.

Baggie is correct

I had an offset mortgage at one time
If you have savings, you pay no interest on the mortgage
It only works favourably if you have a certain amount of savings
I had one when the interest rates were higher than today rates

Worth investigating nevertheless

There's a significant downside to an offset mortgage, as one poster found out a few weeks ago when she tried to apply for universal credit.

She was self employed, the major earner in the family and earned just over £50k and had lost all her income due to coronavirus but not entitled to the self employed grant due to her income.

An offset mortgage is actually an interest only mortgage with a linked savings account, so the repayment element of the mortgage along with any overpayment counts as 'savings' not mortgage repayments, so you're expected to live on this until it gets down to under £16k before you're entitled to universal credit, while your existing mortgage debt remains in full.

If she'd had a standard repayment mortgage, she would have been entitled to help, but not with an offset mortgage even though her net financial position is exactly the same.

Barbara

Interesting point

As I said, mine was a few years ago, when interest rates were much higher

I thought Universal Credit didn't pay mortgages, only rent during unemployment. Or are there special circumstances due to the virus ?

The UC is to help meet basic expenses, like food and bills, someone renting may also receive help with their rent, but not for mortgage payers.

But the point is that if someone has an offset pot they're expected to use this before receiving UC, even though it's not really available savings, it's mortgage repayments that are kind of in a 'holding cell' but someone with a repayment mortgage is not expected to release their equity before they are entitled to UC.

Which is why people are encouraged by financial sites to have 6 months+ of savings, life insurance, critical illness insurance etc
Although they don't always pay out etc

I've been made redundant in the past
£73 doesn't pay all the bills
I was lucky to get another job quickly

I'm unfamiliar with UK mortgages but here in the US as long as you make sure when you take out your mortgage that there are no repayment penalties, you can throw extra cash at your principal any time you want to pay your mortgage down quicker. Obviously always double check any extra cash is ONLY going to the principal and even one extra payment a year can take years off your mortgage, saving you a large amount. Mortgages are "front loaded" meaning in the early years most of your payment is going to the interest on the loan rather than making any meaningful dent in the principal, so paying down the principal quicker means less interest over the life of the loan.

The position is similar here. Most mortgages let you overpay at least something without penalty, a few have an unlimited overpayment facility. However because of the economic uncertainty we're facing, lots of us are wondering whether what was a previously sensible strategy is less so now, and whether it might be better to just save as much as possible in case of further economic shocks.

Yes, Pubs is right. When I was helping my children reduce 2 mortgages both had a you can repay up to 10% a year without penalty so eg I made one payment in Dec and the other after 1 Jan and we did a final one in February which did come with a penalty but was less than had it been applied to that original 20%.

On the other hand plenty of people cannot remortgage to get the money out later nor easily move so might prefer some savings unless on verge of needing universal credit state support in which case savings scupper that.

Nowadays with such low interest rates if the average woman kept 1/3 of her money in cash she wouldn't be close to being able to retire comfortably.

Of course there are many caveats and every person's financial situation is completely different.

1. The actual amount you earn obviously is a big factor. You need a cash emergency fund and if you have a low income that alone might take you a long time to accumulate.
2. Years to retirement. Obviously if you are only a few years from retirement you may want to move into much longer risk investments to protect your nest egg.
3. Noone knows the future and the current world economy is more in danger and volatile than it's ever been but you would have to believe that every single major company and country will stop functioning and trading to think that stock won't be worth anything in the future. In that case fiat currencies would be worthless too and we would be back to 100% bartering. As I think it's highly unlikely that the richest and most powerful people across the world would be willing to let the planet go to the wall economically, people still need to eat, buy medicines and use electricity and gas which unless capitalism ends entirely will be provided by companies.
4. The stock market is exactly the same place your "dependable" retirement account is invested, but if the idea terrifies you, you can become a landlord or put some of your money into companies that own Real Estate or other investments outside the stock market. Although usually the best portfolio is diversified in stocks/bonds/real estate/cash/gold/a small business etc. etc.
5. Bonds have not been discussed but a bond is where you lend an entity, such as a government or school district money and they give you a guaranteed return. It is usually a modest amount (say 3%) but as long as that entity can pay it's own bills your money should be safe.
6. Risk is clearly up to the individual but those who bought shares in Amazon around 2000 for $17 each now find even in a pandemic that they are worth $2,500 each. You can definitely lose money as well as make money but Index Funds take away the stress of wondering which shares to pick. As I keep stressing, the stock market is for long term investing. I wouldn't consider it a gamble that Amazon will be worth more in 10 years than it is today, others might and that's fair enough. If I could I would buy shares in my local dairy that has been delivering from a choice of up to 300 items weekly to our doorstep.

@HopelessLayout YANBU.

Inflation rates are expected to rise due to quantitative easing and monetary financing policies in effect today that reduces the value of the sterling in circulation (i.e., by printing money, you tend to devalue the currency in circulation). Bank of America recently upgraded it's forecast for the price of gold to double in the next 18 months because of the amount of USD being printed by the Fed. The BofA report is titled, "The Fed can't print gold"

I definitely think it's wise to keep a generous cash reserve right now. DH is still working but only 3 days out of 5. Our fixed bills haven't changed however so we are using our savings. If we hadn't saved a good cushion we would definitely be in a much more scary position. So I definitely won't be throwing any money at the mortgage until we have a better idea of the future. If I had spare cash at that point I would put it in other investments rather than the mortgage or save it for the home improvements we want to do.

It does seem a lot of investors are putting their money into more tangible products such as gold (and even silver).

Yeah... price has increased.

Inflation is why shares would be better than cash at that point. "Quantitative easing" is the reason that stock markets have been on a historic bull run since 2008 and house prices keep increasing. As fiat money is diluted by over supply people want to put their wealth into something that will (hopefully) retain value.

What I hope more than anything however is that the Democrats take the Presidency and the Senate in November (they are already a majority in the House of Representatives). I think they would inact a new New Deal and finally give the entire American population a secure social safety net. There is huge support for this in the US now. It is literally insane and frankly evil that Trump can claim the economy is doing well because the stock market is recovering (although I think it lost at least 400 points already today) while 30 million people are unemployed. Financial security shouldn't be for the lucky few and billionaires don't need extra billions. The top 0.5% of Americans have seen their tax burden reduced 82% from 1980 to 2020 and it's unsustainable.

There's a reason historically nomadic people are known for collecting and wearing gold and silver jewelry and coins.

I think you need cash savings to cover an emergency fund. 3-6 months of expenses. The idea is security and not get rich through it.

Beyond that find something else to do with your cash.

Pension
Shares
Overpay mortgage
Spend it

I think the current situation shows that 6 months of expenses isn't enough. The economy stopping and starting and potential lockdowns could go on for a couple of years. The world economy will very likely be in the toliet. The US economy is based on 70% consumer spending. Everyone will finally be converted to the concept of saving and the economy will contract. 1 year minimum is safer.

Any thoughts on taking out debt over the coming months? We are mid renovation and wondering whether to hang fire (possible but miserable to live with the house finished) or take on debt e.g. increase mortgage or take personal loan to cover costs like kitchen renovation.

What are we expecting interest rates to do?

And in a final insult nationwide dropped childrens isa from 3% to 1% today because BoE dropped the rate by less than one percent

Tiddle how safe are your jobs and income? Are they recession proof? Do you have a cash cushion?

Interest rates can't go up any time soon because the whole world in over leveraged and in debt up to the eyeballs.

We have a cash cushion for one of us losing our job for 6 months, both for 3 months. Jobs are pretty solid but who knows really? Both permanent jobs and not likely to be made redundant compared to others.