The rising cost of living

[bickster]

2 hours ago, Genie said:

Parking at Taylor Swift concert

 

Good, they'll be able to afford less of the twenty seven million variants of her lastest album

[Seat68]

21 minutes ago, bickster said:

Good, they'll be able to afford less of the twenty seven million variants of her lastest album

Well thats rude, there are only currently 11 versions

[bickster]

12 minutes ago, Seat68 said:

Well thats rude, there are only currently 11 versions

Give it time when it's rereleased for the 51 month anniversary of it's release after it hasn't been available from distributors for 3 days

[foreveryoung]

There ya go, Natwest profits up a billion in the first 6 months to 3.6 billion pre tax. No doubt the boe screwing the public interest rates helped alot, also that they are one of the banks with the lowest savers rate still. 

People need to wake up!!

[Genie]

Higher interest rates was always going to divert money to the banks, as they always offer lower rates for savers than borrowers.

What a time to be alive. Those filthy rich energy companies and banks taking it in turns to get billions of pounds for nothing.

[bickster]

2 hours ago, Genie said:

Higher interest rates was always going to divert money to the banks, as they always offer lower rates for savers than borrowers.

Yes they do but that isn't the issue. It's the interest gap between borrowing and saving that has increased. If one goes up, so should the other.

There really should be regulatory action because the whole point of what the BoE are doing is to discourage spending (I think they are wrong but....) to reduce inflation. If saving isn't encouraged by passing on the rate rises to consumers, then there is definitely an argument that the banks themselves are fueling inflation

[Genie]

11 minutes ago, bickster said:

Yes they do but that isn't the issue. It's the interest gap between borrowing and saving that has increased. If one goes up, so should the other.

There really should be regulatory action because the whole point of what the BoE are doing is to discourage spending (I think they are wrong but....) to reduce inflation. If saving isn't encouraged by passing on the rate rises to consumers, then there is definitely an argument that the banks themselves are fueling inflation

That’s the same as what I said isn’t it?  

[Demitri_C]

21 minutes ago, Genie said:

That’s the same as what I said isn’t it?  

I thought i was going crazy as it sounded the same

[bickster]

56 minutes ago, Genie said:

That’s the same as what I said isn’t it?  

No it really isn't what you said. You said they always offer less to savers than borrowers, it's true, that margin between the two is their profit. They will always do what you said. The problem is that the rate rises have been passed on to borrowers but not to savers. If they'd done the right thing and passed on the rate rises to both, they would still be offering exactly what you said, higher rates to borrowers than savers.

 

[Genie]

20 minutes ago, bickster said:

No it really isn't what you said. You said they always offer less to savers than borrowers, it's true, that margin between the two is their profit. They will always do what you said. The problem is that the rate rises have been passed on to borrowers but not to savers. If they'd done the right thing and passed on the rate rises to both, they would still be offering exactly what you said, higher rates to borrowers than savers.

 

Savings rates have increased a lot in recent months, just not at the same rate as mortgage increases. Their profit should not necessarily be this delta, they aren’t a foreign exchange company. Banks have many sources of revenue so they don’t need to pocket the delta between what they charge and what they give out.

Also, if they offered better savings rates it would have a bigger impact on reducing inflation as people are incentivised to save rather than spend.

Its just greed.

 

 

[bickster]

10 minutes ago, Genie said:

Its just greed.

Not disagreeing with that but any company has a fiduciary responsibility to it's shareholders to do the best for them, which is why regulation is always needed in sectors like this as that reduces the boards liability to their shareholders

[CVByrne]

55 minutes ago, Genie said:

Higher interest rates was always going to divert money to the banks, as they always offer lower rates for savers than borrowers.

What a time to be alive. Those filthy rich energy companies and banks taking it in turns to get billions of pounds for nothing.

That's how banks make money, they lend money out at higher rates than they borrow money or pay interest on deposits. If banks charge a 30% risk premium on loans to customers. 30% of 5% = 1.5% while 30% of 1% = 0.3%

So the profits on their loans always go up with higher interest rates. Also with more volatility (ie changes in interest rates) there is more activity in relation to things like early refinancing of loans etc.. So the amount of business activity for banks goes up. 

[CVByrne]

2 hours ago, bickster said:

Yes they do but that isn't the issue. It's the interest gap between borrowing and saving that has increased. If one goes up, so should the other.

There really should be regulatory action because the whole point of what the BoE are doing is to discourage spending (I think they are wrong but....) to reduce inflation. If saving isn't encouraged by passing on the rate rises to consumers, then there is definitely an argument that the banks themselves are fueling inflation

Yes, Banks should be raising the interest rates for savers. The reason they are slow to do this is because people haven't been moving their savings around to shop for good savings deals. So banks are profiting on the complacency of their customers. If people saw higher rates on offer for savings accounts, locked in 1 year rates etc.. they would use them thus taking more money out of circulation and that puts downward pressure on Inflation

Edited July 28, 2023 by CVByrne

[bickster]

1 minute ago, CVByrne said:

Yes, Banks should be raising the interest rates for savers. The reason they are slow to do this is because people haven't been moving their savings around to shop for good savings deals. So banks are profiting on the complacency of their customers. If people saw higher rates on offer for savings accounts, locked in 1 year rates etc.. they would use them thus taking more money out of circulation and that puts downward pressure on Inflation

It's really not a chicken and egg situation. Blaming it on the complacency of savers when there's Eff all point in saving is dumb

If the carrot was there maybe the donkeys would follow

[foreveryoung]

The people this is affecting just don't save like they used to. The banks an more importantly the old fashioned boe need to wake up to this trend.

[blandy]

2 minutes ago, foreveryoung said:

The people this is affecting just don't save like they used to. The banks and more importantly the old fashioned BoE need to wake up to this trend.

You can’t save if you have no spare money because the cost of everything has gone up. 

[Genie]

9 minutes ago, CVByrne said:

That's how banks make money, they lend money out at higher rates than they borrow money or pay interest on deposits. If banks charge a 30% risk premium on loans to customers. 30% of 5% = 1.5% while 30% of 1% = 0.3%

So the profits on their loans always go up with higher interest rates. Also with more volatility (ie changes in interest rates) there is more activity in relation to things like early refinancing of loans etc.. So the amount of business activity for banks goes up. 

I know that banks make profits on loans, and now they are making much more profit on their loans than they did before the rate hikes hence we’re going to see a wave of record profits from them all.

They could have increased savings rates by a comparable amount, still made loads of money and also helped bring down inflation faster… but they don’t, cos they are greedy bastards.

[bickster]

6 minutes ago, Genie said:

… but they don’t, cos they are greedy bastards.

Fiduciary responsibility

[CVByrne]

12 minutes ago, bickster said:

It's really not a chicken and egg situation. Blaming it on the complacency of savers when there's Eff all point in saving is dumb

If the carrot was there maybe the donkeys would follow

What I mean is if savers moved their money out of banks into money market funds or to the other smaller banks offering good interest rates then that would force the banks to compete with proper savings rates to stop the outflow of depositors. The fact people aren't doing that at in a big enough scale has meant the banks can get away with offering lower savings rates for longer.

tbf though most banks are offering good rates now. HSBC offer like 4.5% which is a good rate for example. 

[CVByrne]

19 minutes ago, Genie said:

I know that banks make profits on loans, and now they are making much more profit on their loans than they did before the rate hikes hence we’re going to see a wave of record profits from them all.

They could have increased savings rates by a comparable amount, still made loads of money and also helped bring down inflation faster… but they don’t, cos they are greedy bastards.

I would say they should have and really there should have been pressure earlier for them to do so. 

I don't think banks will make record profits though. I think the pre 2008 era was likely still where the record reckless risk taking lead to record profits.