Savings and Investments thread

valleynick66 said:

cantersaddick said:

https://www.bbc.co.uk/news/articles/cm4g1zrl2nrqo

Changing the subject slightly - whilst everyone knows I am opposed to drilling for new oil and gas and opposed to the Jackdaw approval announced yesterday - there are some interesting bits of information coming out with the announcements at the moment. 

This article got my attention. I welcome the creation of the energy wealth fund for investing the reciepts from North sea oil and gas - though in reality this is far too little and 50 years late. The bit that really got my ears up was around the analysis of what could have been if we had done this since we started drilling in the north sea. The Treasury analysis estimates that this would be around £1tn if it had been done from the start. However this for me misses the key point that is the biggest issue with how the north sea resources have been used. The analysis only includes the receipts the UK government did actually recieve from North Sea oil and gas - not what they were actually worth. Rights were sold to private compaies for around 20% of their actual value. If we had adopted the Norway model and had a state owned energy production and supply company that would operate these for us and thus recive 100% of the benefits. As such the estimate of the £1tn wealth fund is an underestimate by a factor of 3 or 4 once costs are taken into account. This shows the real cost the short term decision making that prevailed in the 80s, 90s and early 2000's. Its a huge shame and missed opportunity. 

Same goes for housing. If 20% of the money raised from selling council houses under right to buy was reingfenced to be re-invested in council housing Ad infinitum then we would be sitting on another £1tn asset. 

Shame.

Hindsight is a wonderful thing. 

cantersaddick said:

bobmunro said:

Rob7Lee said:

Huskaris said:

Completely agree with Canters on the "bad economics" of using interest rates in the scenario we are currently in. 

I have for a while thought that using the tax system is a better way to cool the economy. Originally I thought dynamic PAYE/broader tax etc could be the answer (whilst reducing government debt) but appreciate not rising rates could lead to imported inflation etc. 

I feel consumers get screwed the most. I did some reading on this and saw Keynes suggested a "compulsory deferred savings" model where rather than destroying wealth (raising interest rates extracts money from mortgage holders and permanently transfers that money to commercial banks as profit or to cash savers as a yield, yet another thing for boomers to smile about!), the model would effectively add a couple percent onto PAYE which would be locked away in an account with your name on it, which can later be accessed either through pension or a later date. Thus cooling the economy without screwing the consumer. 

Interest rate rises are just another way for the elderly to win, and young debt loaded mortgage holders to lose, I think that generation has probably had enough "winning", too much in my opinion. 

But also, in scenarios like what we currently see which I would argue is more supply side than demand side, raising interest rates perversely would further reduce investment at a time where we need it more than ever (a lot of it to fix these supply side issues surrounding energy, be that green or any other type). Making borrowing more expensive for the companies that will get us out of trouble seems bizarre to me. 

Finally, if the government mandates that these savings have to go on government debt, that would give the treasury a stable cheap source of financing. 

The down sides are the currency collapsing, it missing people who have wealth and pay CGT (maybe increase those rates dynamically or do something similar?) but these are all details...  

Basically a long way of me saying I don't like interest rate rises, replace them with something better!

Interesting. Just on one point about the older generation winning (if rates go up), don’t forget that many of those also saw interest rates rocket to double digit %. I can remember when I started work the panic of those with mortgages (which were all variable in those days) on how it was going past their monthly income and the huge numbers that ended in repossessions as they could no longer afford and many had debt still even after repossession as houses were worth less than the mortgages they owed. It wasn’t all plain sailing.

when I first mortgaged in around 92 rates were still around 9.5%.

Not having that - boomers are to blame for everything!

I jest of course - same old, same old. 

UK Mortgage & Base Rate Trends by Era

• The 1980s (High Inflation Era):
  • Average UK mortgage interest rates hovered around 11% to 14% (mean rate for the decade was roughly 11.9%).
  • The Bank of England base rate peaked at 17% in late 1979/1980 and remained high through economic volatility. 

The 1990s (Recession & ERM Crisis):

• Standard variable mortgage rates peaked sharply around 14% to 15.4% in 1990 as the base rate hit 15%, before gradually declining.
• The decade average for UK mortgage rates dropped to around 7.9%. 

The 2000s (Pre-Crisis Stability & Crash):

• Mortgage rates stabilized and averaged around 5.2% across the decade.
• Typical two- and five-year fixed rates sat between 4.5% and 6.5% until the 2007–2008 global financial crisis triggered emergency interest rate cuts by Bank of England

The 2010s (The Low-Rate Decade):

• Fueled by quantitative easing and a near-zero base rate (held at 0.5% for years), the decade average for UK mortgages fell to 2.6%.
• Typical fixed deals dropped as low as 2% to 4%.

The 2020s (Pandemic Lows to Post-Inflation Rise):

• 2021: Hit record lows with rates dipping down to 1.5%–3% (base rate dropped to 0.10% in March 2020).
• 2022–2023: Central banks raised rates rapidly to combat inflation, with the Bank of England base rate peaking at 5.25% in August 2023.
• 2024–2026: Rates moderated as the Bank of England cut the base rate down to 3.75% by late 2025. Current typical UK mortgage deals generally range between 4% and 6% depending on the product and LTV (Loan-to-Value) tier.

We bought our first property in 1985 and at it's peak we were paying nearly £700 a month in mortgage (including an endowment premium!). My take home pay in 1985 was around £750 a month (and that was working six days every week). My wife worked full-time then and we managed to just about live on her pay - no savings, no holidays (our first family holiday was when the boys were 5 and 7 in 1996 - a week in a caravan in Devon)., no eating out, no £5 coffees from Starbucks on the way to work, no new mobile phones every couple of years, one clapped out car until I got my first company car in 1989 - even then still just one car. Our first child was born in 1989 - child care so my wife could return to her full-time job? You're having a laugh - I would get home from work around 7.30pm and my wife left at 8pm to start her night-shift at Tescos and as she returned home the next morning I was just about to leave for work. We survived by saving what little we could and buying outright what we needed for the house and family - not on credit cards.

Tell the kids that today and they won't believe you.

House price inflation in London and the south-east is a problem - there is no denying that. But 75% of the population do not live in London and the south-east. We bought our current house in 2008 and in the intervening 18 years it has risen in value by about 60% - that's a Compound Annual Growth Rate of about 2.6%.

I'm not complaining now of course (I wasn't complaining then - we just got on with it) - we are now very comfortable. Hey ho, I thought we'd had enough of winning!

Rob7Lee said:

cantersaddick said:

bobmunro said:

Rob7Lee said:

Huskaris said:

Completely agree with Canters on the "bad economics" of using interest rates in the scenario we are currently in. 

I have for a while thought that using the tax system is a better way to cool the economy. Originally I thought dynamic PAYE/broader tax etc could be the answer (whilst reducing government debt) but appreciate not rising rates could lead to imported inflation etc. 

I feel consumers get screwed the most. I did some reading on this and saw Keynes suggested a "compulsory deferred savings" model where rather than destroying wealth (raising interest rates extracts money from mortgage holders and permanently transfers that money to commercial banks as profit or to cash savers as a yield, yet another thing for boomers to smile about!), the model would effectively add a couple percent onto PAYE which would be locked away in an account with your name on it, which can later be accessed either through pension or a later date. Thus cooling the economy without screwing the consumer. 

Interest rate rises are just another way for the elderly to win, and young debt loaded mortgage holders to lose, I think that generation has probably had enough "winning", too much in my opinion. 

But also, in scenarios like what we currently see which I would argue is more supply side than demand side, raising interest rates perversely would further reduce investment at a time where we need it more than ever (a lot of it to fix these supply side issues surrounding energy, be that green or any other type). Making borrowing more expensive for the companies that will get us out of trouble seems bizarre to me. 

Finally, if the government mandates that these savings have to go on government debt, that would give the treasury a stable cheap source of financing. 

The down sides are the currency collapsing, it missing people who have wealth and pay CGT (maybe increase those rates dynamically or do something similar?) but these are all details...  

Basically a long way of me saying I don't like interest rate rises, replace them with something better!

Interesting. Just on one point about the older generation winning (if rates go up), don’t forget that many of those also saw interest rates rocket to double digit %. I can remember when I started work the panic of those with mortgages (which were all variable in those days) on how it was going past their monthly income and the huge numbers that ended in repossessions as they could no longer afford and many had debt still even after repossession as houses were worth less than the mortgages they owed. It wasn’t all plain sailing.

when I first mortgaged in around 92 rates were still around 9.5%.

Not having that - boomers are to blame for everything!

I jest of course - same old, same old. 

UK Mortgage & Base Rate Trends by Era

• The 1980s (High Inflation Era):
  • Average UK mortgage interest rates hovered around 11% to 14% (mean rate for the decade was roughly 11.9%).
  • The Bank of England base rate peaked at 17% in late 1979/1980 and remained high through economic volatility. 

The 1990s (Recession & ERM Crisis):

• Standard variable mortgage rates peaked sharply around 14% to 15.4% in 1990 as the base rate hit 15%, before gradually declining.
• The decade average for UK mortgage rates dropped to around 7.9%. 

The 2000s (Pre-Crisis Stability & Crash):

• Mortgage rates stabilized and averaged around 5.2% across the decade.
• Typical two- and five-year fixed rates sat between 4.5% and 6.5% until the 2007–2008 global financial crisis triggered emergency interest rate cuts by Bank of England

The 2010s (The Low-Rate Decade):

• Fueled by quantitative easing and a near-zero base rate (held at 0.5% for years), the decade average for UK mortgages fell to 2.6%.
• Typical fixed deals dropped as low as 2% to 4%.

The 2020s (Pandemic Lows to Post-Inflation Rise):

• 2021: Hit record lows with rates dipping down to 1.5%–3% (base rate dropped to 0.10% in March 2020).
• 2022–2023: Central banks raised rates rapidly to combat inflation, with the Bank of England base rate peaking at 5.25% in August 2023.
• 2024–2026: Rates moderated as the Bank of England cut the base rate down to 3.75% by late 2025. Current typical UK mortgage deals generally range between 4% and 6% depending on the product and LTV (Loan-to-Value) tier.

We bought our first property in 1985 and at it's peak we were paying nearly £700 a month in mortgage (including an endowment premium!). My take home pay in 1985 was around £750 a month (and that was working six days every week). My wife worked full-time then and we managed to just about live on her pay - no savings, no holidays (our first family holiday was when the boys were 5 and 7 in 1996 - a week in a caravan in Devon)., no eating out, no £5 coffees from Starbucks on the way to work, no new mobile phones every couple of years, one clapped out car until I got my first company car in 1989 - even then still just one car. Our first child was born in 1989 - child care so my wife could return to her full-time job? You're having a laugh - I would get home from work around 7.30pm and my wife left at 8pm to start her night-shift at Tescos and as she returned home the next morning I was just about to leave for work. We survived by saving what little we could and buying outright what we needed for the house and family - not on credit cards.

Tell the kids that today and they won't believe you.

House price inflation in London and the south-east is a problem - there is no denying that. But 75% of the population do not live in London and the south-east. We bought our current house in 2008 and in the intervening 18 years it has risen in value by about 60% - that's a Compound Annual Growth Rate of about 2.6%.

I'm not complaining now of course (I wasn't complaining then - we just got on with it) - we are now very comfortable. Hey ho, I thought we'd had enough of winning!

I'm not disagreeing with any of this and as I've said many times before I don't want to get into the generation vs generation debate as I think its incredibly unhelpful, its used as a wedge issue and pits "ordinary people" (however you define that) against other ordinary people which isnt the issue facing society/the economy right now. 

But I will say what your analysis of the situation above doesnt account for is twofold affordability impacts. 1) the affordability issue with getting on the housing ladder in the first place. Relative to average income deposits are significantly higher than they have ever been before. 2) the affordability of housing costs generally whether mortgage or renting (before even getting on the housing ladder). There is a lot of analysis out there that shows despite the high interest rates you mention above monthly housing costs are (and have been for 6 years now) a much higher proportion of average incomes than they were for any sustained period in the time periods you mention. This is less about housing and more about wage surpression. 

Again not saying your analysis is wrong but rather that it is incomplete.

golfaddick said:

Here to apologise for my recent posts re predicted base rate rises next year.

Latest Investment webinar I attended this morning are saying the the predictions are that there will be 3 or 4 rate rises over the coming 12 months. The particular investment manager hosting the webinar thought these were pessimistic......but there you have it.

I'm still on the side of rates not doing much after the anticipated 0.25% rise next month but let's see.

golfaddick said:

Here to apologise for my recent posts re predicted base rate rises next year.

Latest Investment webinar I attended this morning are saying the the predictions are that there will be 3 or 4 rate rises over the coming 12 months. The particular investment manager hosting the webinar thought these were pessimistic......but there you have it.

I'm still on the side of rates not doing much after the anticipated 0.25% rise next month but let's see.

golfaddick said:

Here to apologise for my recent posts re predicted base rate rises next year.

Latest Investment webinar I attended this morning are saying the the predictions are that there will be 3 or 4 rate rises over the coming 12 months. The particular investment manager hosting the webinar thought these were pessimistic......but there you have it.

I'm still on the side of rates not doing much after the anticipated 0.25% rise next month but let's see.

golfaddick said:

blackpool72 said:

I expect 3 rate rises next 12 months and I'll be amazed if there isn't. 

But for what reason ?  

If it's to curb inflation then it's the wrong tool. As has been mentioned on here current inflation is not consumer led. Making people poorer due to greater mortgage repayments wont stop the oil price increasing. 

Just don't understand it and the reason why I dont think the BOE will raise rates to that extent. 

golfaddick said:

blackpool72 said:

I expect 3 rate rises next 12 months and I'll be amazed if there isn't. 

But for what reason ?  

If it's to curb inflation then it's the wrong tool. As has been mentioned on here current inflation is not consumer led. Making people poorer due to greater mortgage repayments wont stop the oil price increasing. 

Just don't understand it and the reason why I dont think the BOE will raise rates to that extent. 

cantersaddick said:

Rob7Lee said:

cantersaddick said:

bobmunro said:

Rob7Lee said:

Huskaris said:

Completely agree with Canters on the "bad economics" of using interest rates in the scenario we are currently in. 

I have for a while thought that using the tax system is a better way to cool the economy. Originally I thought dynamic PAYE/broader tax etc could be the answer (whilst reducing government debt) but appreciate not rising rates could lead to imported inflation etc. 

I feel consumers get screwed the most. I did some reading on this and saw Keynes suggested a "compulsory deferred savings" model where rather than destroying wealth (raising interest rates extracts money from mortgage holders and permanently transfers that money to commercial banks as profit or to cash savers as a yield, yet another thing for boomers to smile about!), the model would effectively add a couple percent onto PAYE which would be locked away in an account with your name on it, which can later be accessed either through pension or a later date. Thus cooling the economy without screwing the consumer. 

Interest rate rises are just another way for the elderly to win, and young debt loaded mortgage holders to lose, I think that generation has probably had enough "winning", too much in my opinion. 

But also, in scenarios like what we currently see which I would argue is more supply side than demand side, raising interest rates perversely would further reduce investment at a time where we need it more than ever (a lot of it to fix these supply side issues surrounding energy, be that green or any other type). Making borrowing more expensive for the companies that will get us out of trouble seems bizarre to me. 

Finally, if the government mandates that these savings have to go on government debt, that would give the treasury a stable cheap source of financing. 

The down sides are the currency collapsing, it missing people who have wealth and pay CGT (maybe increase those rates dynamically or do something similar?) but these are all details...  

Basically a long way of me saying I don't like interest rate rises, replace them with something better!

Interesting. Just on one point about the older generation winning (if rates go up), don’t forget that many of those also saw interest rates rocket to double digit %. I can remember when I started work the panic of those with mortgages (which were all variable in those days) on how it was going past their monthly income and the huge numbers that ended in repossessions as they could no longer afford and many had debt still even after repossession as houses were worth less than the mortgages they owed. It wasn’t all plain sailing.

when I first mortgaged in around 92 rates were still around 9.5%.

Not having that - boomers are to blame for everything!

I jest of course - same old, same old. 

UK Mortgage & Base Rate Trends by Era

• The 1980s (High Inflation Era):
  • Average UK mortgage interest rates hovered around 11% to 14% (mean rate for the decade was roughly 11.9%).
  • The Bank of England base rate peaked at 17% in late 1979/1980 and remained high through economic volatility. 

The 1990s (Recession & ERM Crisis):

• Standard variable mortgage rates peaked sharply around 14% to 15.4% in 1990 as the base rate hit 15%, before gradually declining.
• The decade average for UK mortgage rates dropped to around 7.9%. 

The 2000s (Pre-Crisis Stability & Crash):

• Mortgage rates stabilized and averaged around 5.2% across the decade.
• Typical two- and five-year fixed rates sat between 4.5% and 6.5% until the 2007–2008 global financial crisis triggered emergency interest rate cuts by Bank of England

The 2010s (The Low-Rate Decade):

• Fueled by quantitative easing and a near-zero base rate (held at 0.5% for years), the decade average for UK mortgages fell to 2.6%.
• Typical fixed deals dropped as low as 2% to 4%.

The 2020s (Pandemic Lows to Post-Inflation Rise):

• 2021: Hit record lows with rates dipping down to 1.5%–3% (base rate dropped to 0.10% in March 2020).
• 2022–2023: Central banks raised rates rapidly to combat inflation, with the Bank of England base rate peaking at 5.25% in August 2023.
• 2024–2026: Rates moderated as the Bank of England cut the base rate down to 3.75% by late 2025. Current typical UK mortgage deals generally range between 4% and 6% depending on the product and LTV (Loan-to-Value) tier.

We bought our first property in 1985 and at it's peak we were paying nearly £700 a month in mortgage (including an endowment premium!). My take home pay in 1985 was around £750 a month (and that was working six days every week). My wife worked full-time then and we managed to just about live on her pay - no savings, no holidays (our first family holiday was when the boys were 5 and 7 in 1996 - a week in a caravan in Devon)., no eating out, no £5 coffees from Starbucks on the way to work, no new mobile phones every couple of years, one clapped out car until I got my first company car in 1989 - even then still just one car. Our first child was born in 1989 - child care so my wife could return to her full-time job? You're having a laugh - I would get home from work around 7.30pm and my wife left at 8pm to start her night-shift at Tescos and as she returned home the next morning I was just about to leave for work. We survived by saving what little we could and buying outright what we needed for the house and family - not on credit cards.

Tell the kids that today and they won't believe you.

House price inflation in London and the south-east is a problem - there is no denying that. But 75% of the population do not live in London and the south-east. We bought our current house in 2008 and in the intervening 18 years it has risen in value by about 60% - that's a Compound Annual Growth Rate of about 2.6%.

I'm not complaining now of course (I wasn't complaining then - we just got on with it) - we are now very comfortable. Hey ho, I thought we'd had enough of winning!

I'm not disagreeing with any of this and as I've said many times before I don't want to get into the generation vs generation debate as I think its incredibly unhelpful, its used as a wedge issue and pits "ordinary people" (however you define that) against other ordinary people which isnt the issue facing society/the economy right now. 

But I will say what your analysis of the situation above doesnt account for is twofold affordability impacts. 1) the affordability issue with getting on the housing ladder in the first place. Relative to average income deposits are significantly higher than they have ever been before. 2) the affordability of housing costs generally whether mortgage or renting (before even getting on the housing ladder). There is a lot of analysis out there that shows despite the high interest rates you mention above monthly housing costs are (and have been for 6 years now) a much higher proportion of average incomes than they were for any sustained period in the time periods you mention. This is less about housing and more about wage surpression. 

Again not saying your analysis is wrong but rather that it is incomplete.

Rents are to a degree a bit of an apples v pears due to how different rents (and importantly responsibilities) were pre 1989 agreements (some of which still exist). The tenant was responsible for a lot more of the maintenance back then, landlord only the structure and exterior, nothing else. So then it was much more like the tenant was the owner (re repairs and renewals).