To be angered off by the rubbish interest rates?

[dilemma456]

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You are not being penalised. No one is taking away money that you have saved. All that is happening is you are having a drop in unearned income. Why should you get any money at all simply for saving?

Actually savers are being penalised. Without interest the value of their savings will go down in real terms because of inflation. People being encouraged to save is vital for the economy because without savings they are much more likely to lose their homes or need to go on benefits if they lose their jobs or have a drop in income.

I think YABU - a little anyway . It's about seeing the bigger picture I think; if the government can't kickstart the economy soon we'll all have far bigger problems than a lack of interest on our savings (and yes, I am debt free, so I do feel your frustration).

Why not think about a stocks and shares ISA? Admittedly they're more of a long term investment option, but could make you more than 0.1%

We are one of the ones who are benefitting at the moment. Over the past year out mortgage has dropped by a few hundred pounds in total.

We do save too though. We don't see ourselves in the "want instant gratification and can't be bothered to save and wait for the good things in life" type band.

We are enjpying the increase in income from a lower mortgage whilst it lasts, but also saving for the "good things in lufe" alongside, as the interest rates won't last this low.

I can understand why it is frustrating for savers though. I peraticially feel for those who are relying on savings for their income, such as retired people.

But the reason why interest rates are so low is because the economy is fucked. With that you get lower house prices and lower mortgage rates. So you benefit too from that angle.

As with all things, it is swings and roundabouts.

I would shop around for a better rate and transfer your ISA as 0.1% is just pants. Moneysavingsexpert has some good advice. The Natwest e-ISA has a 3.51% rate for transfers over 10K. Good luck.

dilemma - 0.1% is indeed a ridiculous rate.

I have little experience with UK system, but can't you invest in a variety of instruments withing the ISA? For example, corporate bonds offer significantly higher yields at the moment.

You are being penalised if you are sensible with money. The message is that if you spend above your means and get into debt you will be helped but it you are cautious with money, only spend what you can afford and save you will be disadvantaged. I feel sorry for all the pensioners who have worked and saved all their lives ,so that the interest from their savings gives them the fun things above the pension, and are now stuck in a poverty trap and can't go out and have fun.If you save money you expect some return-you don't actually expect them to go down, unless you have done something very risky with them.

Bide your time, dilemma.
Rates will go up soon.

I hope so DaddyJ!!

The cut in interest rates is the only reason I still have a house as my DH's boss illegally demoted him and reduced his income by 75%.

I fully sympathise, without savers it would not be possible for people to borrow money to start businesses or buy houses, home loans etc.

It is pants when the rate of interest on savings is below that of inflation. You are effectively losing money by having it in a bank account. Our elderly neighbours have little more than their state pension and savings.

The biggest problem is the refusal of banks to lend money to people like the OP. They want stupidly large desposits.

We are spending our savings on home improvements. With the recession its possible to get good deals from tradesmen who want work. We are also reducing our mortgage as much as possible.

I'm slightly worried about the "understanding" on this thread that interest rates are increased/decreased to reward/punish past behaviour (of savers/spenders).

Does anyone here know why BoE has cut interest rates to historic lows?

To encourage spending...which it hasn't because job security is uncertain and therefore people are holding on to their money.

The BoE is trying to simulate the mortgage and borrowing market. We are in the depths of recession and many companies are going to the wall because of the lack of credit.

The problem is that the BoE lowering rates is useless unless the banks themselves pass on the low rates to borrowers. What is happening at the moment is that the banks are reducing the rates for savers and not passing on any drop to borrowers.

abbey not profits from drop in base rate

The governant has taken large stakes in many national banks. I think they need to force banks to lend again.

Is that a genuine question Cote?

For the OP, there are some much better cash ISA rates out there than 0.1%, so just move your savings. You should easily be able to find somewhere offering 3.5% with a tiny bit of googling effort. According to Bank of England website, current rate of inflation is 3%, so this should avoid the real value of your savings going down.

Good luck saving your deposit - hope you are able to afford your new home soon.

I don't really get the whole thing anyway.

Presumably they want people to think "the savings interest rate is piss-poor - fuckit I'll go and blow all my savings on a new car and a couple of flat-screen tv's?"

I don't think people think like that...

Surely they could have struck a balance between lower rates for lending while still giving even a tiny incentive to save?

They have been saying for ages that this persistent lowering of the rate hasn't had the desired effect ie encouraging the banks to start lending so why keep doing it?

I feel really sorry for the pensioners.

And myslef as I have a pre-crunch fixed rate and some savings so I am losing on both scores.

Don't worry you will soon be getting plenty of interest

Move your ISA. Mine was paying 0.1% so I found one paying 3.1% and transferred. But it is annoying. Worse for people like my mum and other pensioners who often rely on the income from savings to live off.

Like divineintervention, we are only surviving because of the drop in mortgage rate, as my DH recently lost his job. On the other hand, he might have kept his job if it wasn't for the current economic situation, and I'd rather have him in work and rates higher!
I'm sure rates will go up again soon, this can't last forever surely. [hopeful emoticon]

A couple of people on this thread have mysteriously asserted that interest rates will be v high soon.

Is mervyn king on MN?

lol
Mervyn would be crucified if he said that.

It's a cautious prediction based on what I have heard/read on-/offline.
Nothing more than that, I am afraid.

You can do a lot better than those rates, even on Cash ISAs and even now - do swap if you can.

Also, if you are saving for a house deposit you are seriously quids in - the value of the thing you want to buy is dropping by far more than the value of your savings and will continue to do so for some time. We are in the same position as you. From our perspective, if dh can keep his job, low savings rates are neither here nor there.

If you want to use your money in the next year or so though personally I would avoid putting much in stocks and shares ISAs as I suspect there is a long way to fall yet there.

Thanks for the hope though daddy J!