diamond geezer

 Wednesday, January 19, 2011

I wish they'd put interest rates up. They've been at 0.5% for ages, almost two years now. I know the general consensus is that rock-bottom interest rates are good for the economy, good for hard-working families and for good for Britain, but they're not good for me.

If you borrow money, low interest rates are great. You can borrow lots (assuming your bank will let you), then smile because borrowing costs you very little. If you have a mortgage you're on a winner, because the amount you have to pay back is at a record low. There are no scary financial outgoings when your mortgage payment's peanuts, month after month, year after year. You might even be able to pay off more than the minimum, with ease, so that your debt comes down even faster.

I'm not a borrower. I never racked up large debts through reckless credit card spending. I never stare greedily at some consumer durable I can't afford, then splash out for it anyway. I don't live beyond my means, and if that means not having the latest everything then fine, I'll cope. I see debt as something to avoid, not embrace. I realise that not everybody is like me.

I used to be a borrower. I took out a mortgage on a flat 20 years ago, back when interest rates were in double figures. It was at the limit of what the building society would allow back then, even though today it wouldn't buy a hovel. I paid back over the odds over the years, certainly relative to today's interest rate pittance. And eventually I paid the whole lot off, several years early, thanks to slowly-increasing salary and careful budgeting. I'm not a borrower any more.

I'm a saver now. I add money into the banking system rather than taking it away. At the end of the month I have cash left over, not a gaping financial chasm. It helps obviously not having kids, or a car, or a major drug habit, or an insatiable desire for Bang & Olufsen luxury appliances. I recognise I'm damned fortunate, and I may not be able to live like this forever, but long may it last. I'm a careful, thrifty, responsible member of our economic society. And I'm being shafted.

0.5% is a bloody awful interest rate for savers. Stick £10 in a savings account at 0.5% and by the end of the year you'll have fivepence extra. Even after eighteen years at that rate, your nestegg still won't have reached £11. Meanwhile inflation's currently running at 3.7%. On average that means a £10 kettle would cost £10.40 after one year, and more than £20 after eighteen. The current entrenched disparity between savings and prices means that savers are losing ground, fast.

I'm not earning as little as 0.5%, I'm not stupid. I've got my savings in accounts that pay cosy introductory bonuses, and I've set up reminders to nudge me when they're due to expire. But even these special offers aren't special compared to rates routinely offered in the past. Having money is no longer a licence to print money. The current economic climate favours those with large financial obligations, perverse as it may seem, because the price of debt has never been lower.

I wish they'd put interest rates up. I'm sorry if that would increase your mortgage, force you to default and leave you homeless. I'm sorry if consumer spending would plummet, manufacturing decline and the retail sector collapse. I'm sorry if skyrocketing debt would kick our teetering economy over the brink with dire repercussions for us all. But those of us with savings are already being exploited, eroded, relentlessly, big time. We've been prudent too long, why can't we be greedy for a change?

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