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AIBU?

Share your dilemmas and get honest opinions from other Mumsnetters.

Inflation and interest rates

335 replies

Sallywallywoowoo · 12/07/2023 10:20

The BOE keep raising rates to curb inflation. I understand that is the only thing that the BOE can actually do and so they've got no choice. But isn't there anything else the govt can do? It's genuinely scary seeing articles on the BBC how 1 million mortgage holders will see their payments increase by £500pm by 2026. Literally nobody I know could afford that. And it doesn't even include renters in that number. Presumably loads of them are in the same boat or worse. If their LL mortgage costs go up, then so will their rents.
It seems to me the financial burden could be spread more fairly. Anyone who owns outright isn't feeling the pain. And for the most part that group is likely to be the ones who could most afford it. Especially if they have a load of savings that they're now getting a nice high rate of interest on. Surely things COULD be done differently if the will was there?

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sleepyscientist · 13/07/2023 04:40

Singingthesong · 12/07/2023 23:14

It’s always astonishing how the same people can see interest on saving as free money (even tho it’s been taxed already had someone has had to make a responsible decision to put it aside) but then that same person would bitch if whatever advantage it is they had - maybe a public sector pension (that’s always a good one) or house price increases are somehow their right. Always after their own advantage and someone else’s.

Some people don't believe you should be able to make money of money. So investing etc is fine but it sitting in an account and you getting interest without risk isn't okay in some cultures.

Personally I think mortgage interest rates should be separate from interest rates on purchases such as cars if you want to stop spending to drive down inflation

Wimbo · 13/07/2023 06:19

Whether that is true @meddysam it is not the cause of current inflation nor will it curb it. Different issues.

meddysam · 13/07/2023 06:28

Well people pushing for wage increases because they've been shit for years & getting them in some cases cause there is a low unemployment rate or striking for them is apparently impacting inflation, at least according to the BOE

meddysam · 13/07/2023 06:29

I also don't think increasing interest rates will have a huge impact on inflation. Again inequality, many don't have mortgages or only a small one, many are on fixes.

grass321 · 13/07/2023 06:40

If you want big returns on your money, then why have you stuck it in a savings account? It is free money. Sorry but it is. It's pretty much risk free, assuming you haven't deposited more than £85k in each bank account. If you want to make big money then you have to take some actual risks, not expect big returns for putting your money in a bank account and expecting to just have access to it whenever you like!

I'm the first to encourage people to invest in equities if they want a higher rate of return. But you seem not to understand the basics of banking. Banks have to maintain certain liquidity ratios of assets to liabilities, or in its simplest form, savings to lending. Those savers enable you to have a mortgage. That's why you see some banks offering market leading rates on occasions to increase their deposits,

It's not about risk, it's about opportunity cost. If I put that money in a savings account, I'm losing the opportunity to invest it in other assets, whether equities, bonds, a house, a car, whatever.

Yes, banks are lower risk so they offer a lower return. Equities are the reverse although the risk and return varies. If you're sensible, as you say, you keep your savings under the FSCS limit so you reduce the risk of losing money if the bank fails (UK savers lost money in the Icelandic banking crisis).

But you are being rewarded for giving banks the opportunity to make money on lending out a multiple of your money. Take away interest and people would stick their money in government bonds. But you're happy if Janet loses 40% (there was a total bloodbath in bond markets last year) as she's taken the risk. And under normal conditions, you're also happy for her to make 5% for the same reason.

But it's not ok for Dorothy to stick her life savings in a savings account earning 4% as that's low risk. It doesn't matter that the mortgage market would be in crisis as they wouldn't have the deposits to allow them to lend. It's a very odd way of looking at financial markets.

Baconisdelicious · 13/07/2023 06:40

And yes with only 1/3 of homes being mortgaged it does seem, to me at least, pretty unfair that it's only those households who are having to bear the brunt of curving inflation

You want me, as a single parent to 3 with no maintenance from the ex, who has no family support because her parents are dead and am an only child, to pay more tax because I managed to pay off my mortgage when my parents died?

meddysam · 13/07/2023 06:46

I agree that savings interest rates should be much higher.

Baconisdelicious · 13/07/2023 06:48

We cannot afford an extra £500 a month. I work full time, as does my DH. Can’t up our hours

You know for years as a single full time working parent I have had side hustles - I teach full time, I tutor at the weekend and evenings, I mark exams, I work summer school. I also buy and sell vintage jewellery. So yes, you can up your hours as there's two of you and you can work round each other.

Too many people looking to be bailed out rather than even try and help themselves.

Sallywallywoowoo · 13/07/2023 07:04

@grass321 thank you for your patronising post. Of course I understand banking. I also understand the point of interest, being that banks want to encourage you to invest with them so they can loan that money out and make more off the (higher) interest they charge the borrower.
My point is not that people shouldn't receive interest - as I think you probably fully understand, you just wanted a reason to show how clever you are - it was that complaining that savings interest rates have been low, and that savers having not made much (more) money off the money that they have already got is not the same as the terrible situation that people with new mortgages, or private renter's face. Which is potential homelessness. So no, I don't have that much sympathy for someone not receiving as much FREE money for just having a lot already, and putting it in a bank account where it's nice and safe. I don't have a problem with people receiving interest. I have a problem with their self centred attitude.
And I do believe that the government should be doing more to share the costs around (like they did with the furlough money)

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meddysam · 13/07/2023 07:06

You know for years as a single full time working parent I have had side hustles - I teach full time, I tutor at the weekend and evenings, I mark exams, I work summer school. I also buy and sell vintage jewellery. So yes, you can up your hours as there's two of you and you can work round each other.

Wow, I didn't think teachers had any free time!

meddysam · 13/07/2023 07:09

The gov could bring back MIRAS, often forgotten in the "I had to contend with 18% interest rates & worked 3 jobs" debate.

Baconisdelicious · 13/07/2023 07:14

Wow, I didn't think teachers had any free time!
ODFOD. Seriously. What the actual fuck is wrong with you that you felt the need to say shit like that?

grass321 · 13/07/2023 07:17

I don't have a problem with people receiving interest. I have a problem with their self centred attitude.

I'm confused. You say you don't have a problem with people receiving interest but you then say it's free money and they're selfish?

I don't recall savers were calling mortgage holders self-centred when interest rates were at rock bottom, And, by the way, interest rates were still below inflation so savers were losing money in real terms.

I have a mortgage. The rate is still well below the rate when I bought my first house. That's the risk of owning property, you have to factor in interest rate rises. They were extraordinarily low but that wasn't going to continue indefinitely.

No the government shouldn't subsidise my mortgage payments. Yes it's a painful reality check but it's still lower than it has been. It's tough when property prices are so high but it should help them to fall. It's not the fault of savers and i don't blame them for finally getting more than a paltry rate of interest.

meddysam · 13/07/2023 07:18

@Baconisdelicious I was being facetious, cmon it's a classic trope on MNs.

meddysam · 13/07/2023 07:19

What the actual fuck is wrong with you that you felt the need to say shit like that?

I'm interested to know what your excuse is though?

meddysam · 13/07/2023 07:20

Too many people looking to be bailed out rather than even try and help themselves.

🤔

Twiglets1 · 13/07/2023 07:20

meddysam · 13/07/2023 07:09

The gov could bring back MIRAS, often forgotten in the "I had to contend with 18% interest rates & worked 3 jobs" debate.

MIRAS kept getting reduced so wasn’t worth much by the time interest rates reached their highest point.
There were 75,000 repossessions in 1991. Highly doubt we will see anything like that number in 2024, thank Goodness

Baconisdelicious · 13/07/2023 07:27

meddysam · 13/07/2023 07:19

What the actual fuck is wrong with you that you felt the need to say shit like that?

I'm interested to know what your excuse is though?

Like I say, I work hard. Really hard. So many people around moaning about their lot without trying to do anything about it. Anything at all. Times are tough. Expecting those of us who have been struggling to stay afloat for years to sort it out is ridiculous.

Sallywallywoowoo · 13/07/2023 07:34

@grass321 nope I didn't say that. Perhaps you have a reading problem? Savers are not selfish for receiving interest. The ones who are selfish are the ones complaining the interest rate hasn't been high enough for them to receive as much more money as theyd like just as though that's the same as the potential of not being able to afford to stay in your home
Clearly a lot of people agree with Maggie "there is no such thing as society"
And yes, @Baconisdelicious I would like you to pay more tax IF any of the ideas that we put forward earlier apply to you. I have no idea if they would.

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Baconisdelicious · 13/07/2023 07:36

Yes @Sallywallywoowoo, you want me to pay.more on my home.because my mortgage is paid off. You assume I have a ton of money because of that. I don't. I am stretched...have been stretched for years.

Sallywallywoowoo · 13/07/2023 07:46

Hmm I'm not sure what you mean by "more" since like you said your house is paid off. But anyway I can't be bothered to get into an argument with someone who hasn't actually read any of my posts and so has no idea what I'm actually suggesting.

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Threenow · 13/07/2023 07:48

Nobody is entitled to interest on savings. They are lucky to have had the opportunity to accumulate so much wealth in the first place.

Oh do get over yourself! I have money in the bank and am very grateful for the higher interest rates. What I don't have however is an house/flat which I own. I don't have enough money to buy and I'm too old to get a mortgage, so I will be renting for the rest of my life, and will have to use those savings to pay for everything superannuation doesn't cover.

I could just as easily say "nobody is entitled to own a house".

Overthebow · 13/07/2023 07:57

On the face of it or does seem unfair that a certain group are being disproportionately affected. The same group who had to pay high uni fees and are now paying high student loan repayments each month, and who graduated during the recession and have had stagnant wages since. My household will actually be ok because we remortgaged last year and got a decent 5 year fix but that’s just luck, we would be seriously screwed if we had to re-mortgage this year instead.

But then older people had tough times too, and wouldn’t have got help whilst others were ok. It wouldn’t be fair to make them pay more now either, when they got no help at other times. I really don’t know what the answer is.

Sallywallywoowoo · 13/07/2023 07:58

@Threenow are you renting privately? If so then any changes that id like to see would hopefully help protect you from rent rises from landlords who are putting up rents to cover their mortgage increase.

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Sallywallywoowoo · 13/07/2023 08:02

We also need a LOT more social housing with secure tenancy and rent control.

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