View more on these topics

Low interest rates may be detrimental

For the last few months I have felt like I was marching to my own time rather than in step with the rest of the regiment, at least on the issue of interest rates.

It seemed that every economist and politician, and even people who should know better, were arguing that interest rates should be dropped to only slightly less than nothing to kick-start the economy or if that failed, print more money.

But the good news, at least for my peace of mind if not for the economy, is that others are starting to argue my case.

For example, in the February issue of Lending Strategy which is published this week Adrian Coles, director-general of the Building Societies Association, questions whether cutting the monthly repayments of variable rate borrowers by about 50%, thus releasing cash to spend, save or to repay debt, has been beneficial to the mortgage market.

BSA research shows that the base rate fall has failed to help the availability of mortgages. So low interest rates are not improving mortgage availability and given their impact on savers, they could be detrimental to the high street.

Coles argues that if consumers’ income has fallen 70% from savings and investments, prices would need to fall 70% for them to sustain their living standards.

If prices did fall by 70%, the accepted solution would be to drop interest rates further and get the printing presses in the Royal Mint working around the clock, but that was our starting point.

Recommended

Brokers defy Big Freeze

Brokers are showing their survival spirit by continuing to work despite being snowed in.

Equity release lawyers get professional body

The Equity Release Solicitors’ Alliance has been launched. It aims to ensure that all equity release clients have access to independent legal advice.

Pensions - thumbnail

Auto-enrolment — don’t leave it too late…

With auto-enrolment (AE) well under way for the UK’s largest businesses, over the next three years an additional 800,000 smaller employers (with less than 60 employees) will start their journey to comply with the legislation. AE mandates all eligible employees and their respective employers to make regular pension contributions into a qualifying pension scheme. To learn more about the legislation read our brief Jelf AEase — simple steps to AE compliance guide.

Newsletter

News and expert analysis straight to your inbox

Sign up