Inflation and interest rates.

Not good news that inflation is set to climb to 10% this year, the highest for 40 years. 
But for those of us, well most us, that remember the double digit inflation of 1982, this was also accompanied by a Bank of England base rate of 10%, which although bad for mortgage payers, meant that those with any savings could offset inflation somewhat.
Today with inflation at almost 10% the BoE base rate is only 1%, so anyone with money in even the highest paying accounts are losing drastically.
It's not surprising that house prices continue to soar out of the reach of first time buyers..
Al.

Heads the banks win. Tails we lose.

Micky

I also remember double figure pay increases that  helped .

bikeralw wrote:Not good news that inflation is set to climb to 10% this year, the highest for 40 years. 
But for those of us, well most us, that remember the double digit inflation of 1982, this was also accompanied by a Bank of England base rate of 10%, which although bad for mortgage payers, meant that those with any savings could offset inflation somewhat.
Today with inflation at almost 10% the BoE base rate is only 1%, so anyone with money in even the highest paying accounts are losing drastically.
It's not surprising that house prices continue to soar out of the reach of first time buyers..
Al.

Bring back Mark Carney!
None of us have a crystal ball but I believe it is likely interest rates will continue to rise causing pressure on house prices resulting in a flattening off or even a drop in prices. When I retired 23 years ago I banked on getting a minimum return of 6% on my capital, that happened, NOT!
Turning the clock back when interest rates were last high so was unemployment, now of course the UK has more job vacancies than people to fill them.
Inflation figures are fuelled, excuse the pun, by the cost of energy and the effects of the war in Ukraine, I don't see any immediate relief in these costs.

I will be sitting tight for now, concentrating on keeping costs to a minimum and regarding any extra income from increases in interest rates as a bonus.

Back in the 70's I recall getting pay rises almost monthly as Govt linked pay to inflation which was galloping. Mortgage interest rates shot to 17/18% so the pay increases were needed. Then property values started escalating.

When my father died 35 years ago my sister and I sorted out my mother's finances and found that the interest on her savings would cover her annual council tax and leave a little left over.
When she died 25 years later even though the capital had increased, the interest would hardly pay for a week of council tax..
Al.

Just been up for some layers pellets for our free range hens.  The price has gone up steadily from under £8 a 20 kilo bag and today it was £12 a bag.  Unsustainable.

The question must be how do we solve the problem?

It's a crazy system financial that both Labour and Conservatives have adopted, low interest rates, the only worthwhile investment for most people is the housing market. What's the point of saving money when interest rates are so low. What's the point of having a pension, you cant afford to retire, retire? Whoops, perhaps that is their cunning plan

In future when more and more people can only rent, paying off their student loans etc, they will not be able to fund their social care, and the Government hasn't got lots of spare money. Better to die young, whoops live expectancy rate are not increasing. We're doomed and its all about politicians who want to be popular and get re-elected, and the public who don't vote what is best for society, more what is best for themselves. We're been living beyond our means enjoying a standard of living bought with borrowed money. So much for Gordon Brown's "prudence", and Thatcher's house-wife economics.

groundhog wrote:The question must be how do we solve the problem?

We can't Hog, though most of us on here could beat the current system with ease.

Best solution is in JayTee's quote, can't find it but goes something like this....

"We're not here long so do all you can while you can"

IanH wrote:

groundhog wrote:The question must be how do we solve the problem?

We can't Hog, though most of us on here could beat the current system with ease.

Best solution is in JayTee's quote, can't find it but goes something like this....

"We're not here long so do all you can while you can"

Rearranging the deck chairs on the Titanic isn't going to crack it, what is needed is a radical and I mean radical change in attitude from everyone in the consumer World and that just isn't going to happen. 
Of course we suffer inflation when we suffer because 25% of the worlds grain is destroyed in a war in Ukraine, in some places and I am sure Ian your travels took you there too, they suffer greater famine. At least we have a way out.

Personally I think the global problem and we see bits of it is gross over population. Opinions vary but 1.5 to 2 Billion is optimum, allegedly.......
7.9Billion to date.................

IanH you make a point I fully agree with. Many years ago there was a TV program (1970s) which featured the "Club of Rome".
https://en.wikipedia.org/wiki/Club_of_Rome

One of their messages related to the sustainability of food supply, use of natural resources, was too about the need for the control of population growth. They would have an uphill struggle again the Catholic church, and anti-abortionists etc. How much better is appropriate family planning where children who are born are really wanted by their parents.

I run quite a few vehicles, and rather than put off buying consumables such as near the limit (or old) tyres and iffy batteries, I've bitten the bullet and replaced things now while stores have old stock. I can see that items like this that require expensive raw materials and a high energy input to produce will cost maybe 50% more next year... I can't see my cash in the bank increasing by that much...
Al.

Que Sera Sera..................

Nothing we individuals can practically do.
If inflation is high so should be interest rates (holding breath on that one), that only works though if you actually have any savings................

Whatever you do, don't check your pension pot.

On the positive side, in the last 12 months my Premium Bond holdings have returned 14%..
Maybe I'm lucky!
Al.

bikeralw wrote:On the positive side, in the last 12 months my Premium Bond holdings have returned 14%..
Maybe I'm lucky!
Al.

You're very lucky indeed, mine have given me hardly a bean this year.

bikeralw. I can't see my cash in the bank increasing by that much... wrote:Al.

Mine certainly isn't increasing just happy if the hole in the bucket slows down a bit

Premium Bond interest rate just increased to 1.4% by NS&I wef June 2022.
Would you like me to lend you some money Al, I'll settle for 10%?!!!!!

When we bought our solar panels many, many years ago, we were thought mad. We didn't even have a south facing roof and the panels and fittings were not cheap. We paid for them with a maturing bond and decided to write it off in terms of worrying about interest.

We did get the "old" FIT tariff however and over the years this has more than paid for our energy bills every year.  I use the washing machine and dishwasher- if possible- when the sun is shining and so do it free. It's surprising how little sun is needed to generate enough to run them and it's a rare day, even in winter that we get nothing at all. Over the years instead of performing less well as they aged we had our best year ever last year and this year is looking good so far.  We have much more than paid back the original sum we spent, even with reasonable interest rates.

Our friends are not laughing now....

Quilter wrote:When we bought our solar panels many, many years ago, we were thought mad. We didn't even have a south facing roof and the panels and fittings were not cheap. We paid for them with a maturing bond and decided to write it off in terms of worrying about interest.

We did get the "old" FIT tariff however and over the years this has more than paid for our energy bills every year.  I use the washing machine and dishwasher- if possible- when the sun is shining and so do it free. It's surprising how little sun is needed to generate enough to run them and it's a rare day, even in winter that we get nothing at all. Over the years instead of performing less well as they aged we had our best year ever last year and this year is looking good so far.  We have much more than paid back the original sum we spent, even with reasonable interest rates.

Our friends are not laughing now....

We bought our panels in 2015 and although the FIT had reduced a bit by then the money we have received has now paid off the installation cost. Since being installed I have had to replace the relays in the inverter for about £24 and replace the solar generation meter for £28 (Hint: make sure your installer actually takes out the warranty insurance . Company gone bust = no warranty)

Our real plus is the electric vehicle. With planning around the weather forecast our electricity bill hasn't gone up at all and we are no longer putting £90 of diesel each month (@ 2019 prices) into the car . Now we have paid off the installation we are even being paid to charge the car up.

Bank rate up to 3% today, heading in to 5% territory on fixed rate savings. On that basis the premium bonds are for the chop. Will give it another couple of weeks for the even better rates to come out then it is ditch and switch time.

groundhog wrote:Bank rate up to 3% today, heading in to 5% territory on fixed rate savings. On that basis the premium bonds are for the chop. Will give it another couple of weeks for the even better rates to come out then it is ditch and switch time.

We've had 2 good months on P Bonds, GH. They’ve increased the interest rate to 2.2% so there are more prizes.

At my age I’m not a fan of fixed rate long term accounts