surviving the recession

It’s been noticable that in the last month or two, the share indexes have been rising off their lows. The stock markets famously predict what the real world economy does, falling before a recession takes hold and then rising in anticipation of what the real economy will do.

It’s also now clear that the real world economy is showing signs of stabalisation and that we might pull out of recession by the end of this year. So now could be a good time to buy shares. As always, choose the best stockbroker who will charge a low amount per share deal and be sure to research shares thoroughly before you buy.

The short answer is Yes. Interest rates have been slashed to help existing borrowers who are on adjustible rate or variable rate mortgages. And of course to help business borrow more cheaply.

But just because the returns on savings are extremely low, doesn’t mean that this is the time to stop saving. We don’t know how bad things will get before they recover, and it’s always nice to have money in the bank just in case.

Also remember that the economy won’t be in the doldrums forever. Interest rates will rise again. So save away. In addition note that in the downturn, some assets become very cheap because no one except cash buyers can afford them. Of course if you have been saving determindly, you will have the cash available to buy, whether it is buying shares or perhaps a home that you’ve always wanted at a knock-down price.

The Bank of England slashed bank base rates last week, and while the banks hesitated to pass the cut to borrowers, all of them immediately slashed savings rates. On some instant access accounts, the saving rate is a pitiful 0.1%.

So what do you do if you are a saver? There is one institution left that will pay savers a good return. The government owned National Savings offers a variety of products, the best known of which are their two and five year tax-free bonds. They are, at the time of writing, offering 2 year and five year fixed rate bonds with a tax-free return of 2.95%, and two and five year tax free index-linked bonds with a return of 1% + RPI (retail price index). Given that the retail price index is currently 4.2%, this is a very good return indeed. You can invest with National Savings by going to your local Post Office, or by applying online.  And because National Savings is owned by Her Majesty’s government, it’s the safest place to place your money.