Negative savings interest rates

lilac_lady

If people are charged money for keeping savings in a bank, I'm going to buy shares in piggy bank and home safe companies........

MoneyTrev

It won't fall below zero. You'll be paying to keep money in the bank and people will be protesting. It'll be chaotic and that wouldn't be nice in the situation right now.

ChuckCash

Whether or not the interest turns negative, it's moving dangerously close to zero.

I can understand the idea behind low interest rates to kickstart the economy etc. etc., but surely there must be some kind of incentive for savers to keep deposits in the banks, and presumibly the banks could well do with them in the current climate.

As the rates nosedive, the only other reason i can see for a saver to continue keeping deposits in a bank is for low (no) risk security.

Given the state of the banks at the moment i'm wondering if it's better to move such deposits into something less hazardous, such as under a matress or maybe dabble in some high-risk venture capital, or burn the lot just to spite the bankers.

Any suggestions?

Andrew64

As I see it, once the interest rate that the banks pay us for our deposits is less than the inflation rate, then we are effectively paying them to keep our money!

ebyard

If savings rates were to go negative then there would be riots and the government would very soon be an ex-government.

Something will turn and people will realise that attracting savers is a good thing rather than screwing us all over to pay for their mistakes in lending mortgages to people who can't afford it.

I would be more than happy with a STABLE 5% account.

Reaper

Interest rates don't fall below zero. It's been posted before and it will be posted again. Japan didn't go below zero a few years ago, the US isn't going below zero now. What happens is as interest rates approach zero governments have to switch to different tactics. "Quantative Easing" (printing money in simple terms) would be the next step, though we are still several interest rate drops away from that.

EDIT: I should have read the article before posting! It's not quite what I expected. Actually in the text they quote somebody saying the chances are:

It is not impossible but as close to that as you can get

But they love a good headline.

nicko33

Lokolo wrote: »

Have you seen inflation lately? Its 4.1%.... nowhere near 0% or negative. Long way off that I should think, way after savings rates going down to 0% or less.

But even if inflation went down or whatever, it would still be more beneficial to take the money out and keep it at home where its at 0% rather than negative%

I meant that if inflation is 4.1% then anyone with money in savings accounts paying less than that (after tax) is seeing (or rather, not noticing) the value of their money going down.

inflation or deflation makes no difference:
your account either returns less than inflation or not
I expect loads of people are in the "haven't noticed the bank has sneakily reduced the interest rate" situation.

"More beneficial" is a generalisation.
After saving for 12 years for a deposit on a house, would it really be better for me to keep £100,000 at home?


* figures for illustration purposes only

cheerfulcat

Lokolo wrote: »

Have you seen inflation lately? Its 4.1%.... nowhere near 0% or negative. Long way off that I should think, way after savings rates going down to 0% or less.

If the after tax interest paid on deposits is less than inflation then by definition the return is negative. Just to break even - that is, just to avoid losing value - a basic rate taxpayer would need to get 5% and a higher rate taxpayer needs 7%.

Lokolo

cheerfulcat wrote: »

If the after tax interest paid on deposits is less than inflation then by definition the return is negative. Just to break even - that is, just to avoid losing value - a basic rate taxpayer would need to get 5% and a higher rate taxpayer needs 7%.

Yes but ISAs and non tax payers :T (and tbh thats all I care about for now mwahahaha)

cheerfulcat

Lokolo wrote: »

Yes but ISAs and non tax payers :T (and tbh thats all I care about for now mwahahaha)

That's fine, but you can't then generalise and say that interest rates aren't/won't be negative - for plenty of people they are.