Thursday, March 05, 2009

Interest rates

I can’t believe they’ve been cut again. From a selfish point of view it’s fantastic news. Egg belatedly opened an offset savings account for me as part of my tracker mortgage deal, so I’ve transferred the vast bulk of my savings into that. I also cut my monthly repayment by £200 – by transferring that £200 into the savings account I’m able to keep reducing the interest payments while hanging on to the money as an additional buffer. I only wish I’d done this earlier, but will have to hope I can stave off the recession long enough to build up an additional three or four monthly repayments in case money worries start to bite.

Despite cutting my monthly payment by a quarter, I’ve just paid off another £500 of capital on the mortgage, which will no doubt increase next month with this latest interest rate cut. So yes, it’s great news for me from a selfish point of view.

But it’s a stupid move, nonetheless. It will do practically nothing to get the economy moving again, and hits savers firmly in the pockets. This group is the one group that can save us – give them an attractive interest rate and money will start to pour back into the economy. There will be no quick fix to this recession, however hard Brown et al try to boosting lending, and if it teaches us all to be more careful with debt in the future then it will be a good thing. Any quick fix now would surely only store up more trouble for later on.

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