Your Questions About Uk Banks Interest Rates

Michael asks…

How do interest rates relate to savings rates?

In the UK, the Bank of England has them set @ 0.5% and I know this is to stimulate the economy because we are in a deflationary period. I know that the banks savings rates change in accordance to the bank of England’s rates but they are not exactly the same (i.e. 0.5%). Why do they offer customers larger interest rates? Sorry, to paint a complete theoretical picture of the business world is difficult for me.
Thank you dusty, I’ll give you best answer 🙂

Pip answers:

Banks need money to loan, so they offer larger APR to entice people to open accounts and save. When money is scarce (inflation – means it cost more to buy the same) rates usually rise, to lure more savers.

Sandy asks…

Why are interest rates and base rates higher in developing and emerging countries?

Why are interest rates and central bank interest rates higher in developing and emerging countries? For example, it’s around 9% in Brazil, Hungary or Croatia and it’s around 1-2% in Switzerland, the UK or America.

Pip answers:

Because developing and emerging countries, by definition, have less money available. So if you need to borrow money, you will have to be willing to pay more for that. In other words, supply & demand.
Of course, the central bank or treasury could just print more of it. But then this will cause the relative value of the currency to lose value, that is, it is going to cause inflation to rise. A country’s central bank will then have to balance the supply / demand of its currency against its inflation target and the need to stimulate its economy.

Ken asks…

is the low interest rate crippling the UK economy?

http://uk.news.yahoo.com/22/20110113/tuk-uk-britain-bank-rates-fa6b408.html

no point in investing business wise, means no jobs. IDK inflation keeping it low me think sometimes it might be better to have some inflation and some employment.

comments ta

Pip answers:

By keeping interest rates low, they are encouraging both businesses and the consumer to spend, looking towards the future and kick-starting the economy. But with inflation slowly creeping up and Osborne keeping the rate at 0.5%, there is a risk of the UK entering a deflation (very bad).

Mary asks…

Why is the interest rate in the UK persistently higher than in Europe?

As I understand it, the Bank Rate in the UK is currently 5% and in Europe it is 3.5%, although the exact figures do not matter

I don’t see how such disparities can continue on an ongoing basis. Surely all the investors would go to the economy with the higher rate and all the borrowers to the economy with the lower one. In fact, is this already happening?

Pip answers:

Because we are the mugs supporting europe

Ruth asks…

Best bank for interest rates on joint account? uk plz?

Pip answers:

Bankrate.com

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