Negative savings interest rates

Lokolo

cheerfulcat wrote: »

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.

Pretty much I can. Banks aren't going to have negative interest rates. For most people that would mean they would take their money out of the bank and hide it at home.

Then what? Banks would just die off.

The only people that would are those with large amounts of money and obviously think it would be better to keep it in the bank for safety, but honestly, there aren't enough of those people to keep banks alive if rates do go negative.

cheerfulcat

Lokolo, you have not understood. If the rate of inflation is 4% and the interest rate on your deposit after tax is 3% then the real return is negative - you are losing money.

Lokolo

cheerfulcat wrote: »

Lokolo, you have not understood. If the rate of inflation is 4% and the interest rate on your deposit after tax is 3% then the real return is negative - you are losing money.

Yes I understand that but thats not what you previous post was saying. You then went onto say about interest rates being negative...? Thats nothing to do with losing value in your money?

nilrem_2

Lokolo wrote: »

The only people that would are those with large amounts of money and obviously think it would be better to keep it in the bank for safety, but honestly, there aren't enough of those people to keep banks alive if rates do go negative.

Quite right,

The vast majority of people are small savers who would IMHO remove their cash from a bank if rates went negative, it's psychological, savers will put up with a low interest rate even though they are not happy but if rates went negative they would take the cash out, all small savers added together will probably be worth a lot more to a bank than the few with big deposits.

cheerfulcat

Lokolo wrote: »

Yes I understand that but thats not what you previous post was saying. You then went onto say about interest rates being negative...? Thats nothing to do with losing value in your money?

It's everything to do with losing value! If the interest you are getting is less than the rate of inflation you are losing money in real terms. Look at the BBC article posted earlier -

Out of 256 instant access savings accounts listed by Moneysupermarket.com, 76 already pay less than 0.5% interest and 117 pay less than 1%.

Lokolo

cheerfulcat wrote: »

It's everything to do with losing value! If the interest you are getting is less than the rate of inflation you are losing money in real terms. Look at the BBC article posted earlier -

Yes but the BBC post is saying about actual rates being negative, not the realterms interest rate.....

Dooooooooooooooonut

Of course they can go negative. One scenario would be the government introducing a tax on savings.

Is it likely? In my opinion not at all. Far more likely are 15% interest rates I think, at least in this country. But anyone who says anything cannot happen is a moron. This cannot be stressed enough.

cheerfulcat

The article is just badly written. Interest rates can't go negative as such but they can be effectively negative as in those accounts paying less than inflation.

Dooooooooooooooonut

Of course they can go negative. I just provided one mechanism.

Lokolo

cheerfulcat wrote: »

The article is just badly written. Interest rates can't go negative as such but they can be effectively negative as in those accounts paying less than inflation.

Agree with that.

Donut - what you're saying it tomorrow we are going to have a heatwave..... Better chances on the lottery. So yes, may as well say it won't happen.