Interest rates

[Chris S]

Do people think the Bank of England base rate might go down at the end of this month?

I've got a one year bond to reinvest. If I reinvest it now they guarantee to pay me the existing rate no matter what the bond's new rate is on the renewal date.

 

[vickster]

Do people think the Bank of England base rate might go down at the end of this month?

I've got a one year bond to reinvest. If I reinvest it now they guarantee to pay me the existing rate no matter what the bond's new rate is on the renewal date.

Seems to be the view of the boffins...Trump not withstanding! It'll only be a quarter of a percent

 

[Jenkins]

Do people think the Bank of England base rate might go down at the end of this month?

I've got a one year bond to reinvest. If I reinvest it now they guarantee to pay me the existing rate no matter what the bond's new rate is on the renewal date.

Depending on your tax situation, what about a 1 year cash ISA? The interest rate may be slightly lower but the interest will be tax free. Don't forget as a basic rate tax payer you can only earn £1000 in interest on normal accounts before tax is paid, so if you already have other investments the ISA may be a better option.

 

[vickster]

Depending on your tax situation, what about a 1 year cash ISA? The interest rate may be slightly lower but the interest will be tax free. Don't forget as a basic rate tax payer you can only earn £1000 in interest on normal accounts before tax is paid, so if you already have other investments the ISA may be a better option.

And only £500 as a higher rate payer.
There are some ~4.4% fixed cash ISAs out there for up to 20k

 

[Psamathe]

Depending on your tax situation, what about a 1 year cash ISA? The interest rate may be slightly lower but the interest will be tax free.

You can get 1 year bonds as cash ISAs with same interest rates as non-ISA (last time I checked).

Ian

 

[wafter]

The consensus seems to be lots of rate cuts due to dead-on-feet economy taking another knee to the groin from the tariffs..

While previously the establishment touted lots of cuts in a return to (abnormally) low "normal" rates this always seemed like the public-appeasing blag it turned out to be... however this time it looks a lot more likely as the tatty state of the economy becomes ever-more-evident and the government scrabble for excuses to buy back public sentiment.. probably at the cost of more actual pain from inflation.

FWIW I've just put my pittance into a fixed-rate ISA as the last year's variable got a disproportionate haircut so would likely be much worse in the face of many cuts. I also have a variable easy-access saver that's something like 4.5-4.6%; although I doubt for much longer.

 

[presta]

I've got a fixed rate ISA maturing in a few days, and they're obviously expecting rates to go down because the rates on offer for a new account get lower and lower the longer you fix for.

 

[bikingdad90]

General rule; High inflation is associated with lowering interest rates to counter act the lack of buying power and to try and bring inflation down to encourage people to spend.

It is vice versa when inflation comes down the interest rates go up to entice saving.

That said politicians do things that cause funny things to happen like quantitative easing or printing new money.

 

[teeonethousand]

General rule; High inflation is associated with lowering interest rates to counter act the lack of buying power and to try and bring inflation down to encourage people to spend.

It is vice versa when inflation comes down the interest rates go up to entice saving.

That said politicians do things that cause funny things to happen like quantitative easing or printing new money.

I think it's the opposite..too high inflation = higher interest rates to discourage spending . Too Low inflation higher interest rates until some sort of agreed inflation target... Currently 2%

 

[bikingdad90]

Sorry @teeonethousand, you are correct.

Raising interest rates will slow inflation and start to reduce inflation. So high interest rates = low inflation.

 

[midlandsgrimpeur]

Do people think the Bank of England base rate might go down at the end of this month?

I've got a one year bond to reinvest. If I reinvest it now they guarantee to pay me the existing rate no matter what the bond's new rate is on the renewal date.

Did you shop around? You can still get 4.61% on a fixed 1 year bond with Close Brothers and Cynergy Bank.

 

[silva]

The reason why central planners rose interest rates later 2020, after a decade of near zero, was that the havoc that the lockdowns and store closures made people hoard, including banknotes.
https://data.ecb.europa.eu/data/datasets/ILM/ILM.M.U2.C.L010000.Z5.EUR
Look at how the amount banknotes in circulation (=outside banks) whopped up starting with the lockdowns.
In order to stop it, the central planners rose bank deposits interest rate, which is creating money out of nothing, that is added to bank accounts.
So those that hoarded banknotes = removing it from banks, got punished, and motivated to bring it back. As seen on the chart, the hoarding stopped mid 2022, and the trend line returned to the angle it had for decades, the planned angle.

There were 2 occasions of such increased hoarding banknotes before, after the 11 september 2001 attacks, and after Lehman Brothers bankruptcy in 2008, only that the hoarding period was just some weeks / couple months while the lockdowns made ppl hoard during more than 2 years. Central planners don't like people removing their money from banks, and increasing bank deposit interest rate + disrupting economy brings price inflation, which is what happened, so those with banknotes saw their purchasing power decrease that much more than those that left their money at banks.