With a decrease in interest rates it is difficult for savers to get a return on their investments or savings. For some it has resulted in a huge decrease in disposable income.
Copyright (c) 2009 Gareth Flanagan
With many pensioners getting no return on their savings,is it worth it.
Good news for those on a variable rate mortgage, but savers are going to be very demotivated.
So what should you do?
Everyone has different circumstances, but a professional adviser should be able to discuss your needs and tailor the advise to suit your circumstances:
Savers should consider investments with a higher rate of return People with tracker rate mortgages will benefit from falling rates – and could consider overpaying their mortgages and saving money in the long term. Borrowers with variable rate mortgages need to keep a keen eye on what their banks are doing – not all banks have passed on the Bank of England rates cuts to their variable rate borrowers. Despite the rate cuts from the Bank of England since October, the average standard variable rate has fallen by only 2 points. New borrowers or those moving their mortgages should weigh up the benefits of a variable vs. a fixed rate mortgage. Some fixed rates offers may have already hit their floors. People with mature or maturing bonds should check how their banks are handling them – some banks automatically roll mature fixed-rate bonds into accounts that can pay as little as 0.1%. Whether you’re a borrower or a saver, the difficult economic climate can make it equally challenging to ensure that you’re getting the best rates available.
Many savers and investors have experienced a terrible time over the last 6 months due the drop in interest rates. Many pensioners have been subsidising their pension income with the interest generated from their life savings. Previously a pensioner with a £100,000 of life savings would have been receiving on average a 5% interest return on their savings generating £5,000 per annum on top of their pension income. With many of the banks dropping the interest rate to 0% on savings this has forced investors to eat into their capital.
The good news there are many investment products to choose from. It is now time that investors research different investment methods in order to get a more pleasing return and preserve their capital.
The best bet? There has never been a more urgent time to seek independent financial advice.
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