Negative savings interest rates

LesU

I've just been reading up on what Japan went through, first in the 90's and then again in the early 2000's. The articles and press releases are so eerily similar. The Government's bailing out plans, 0% bank rate, the threat to savers, the clash between the Bank of Japan and the politicians, the 'spend your way out of the problem' approach by the government. All of the elements are there.
All you have to do is replace Japan with the UK in the article for it to look 'up to the minute'. One difference was that they got into a deflationary spiral, but we are just at the start of our difficulties, so who knows?

In Japan there was effectively negative savings rates. The rate was virtually or actually 0%, but the banks charged a fee for looking after the money and having a government backing guarantee (like charging for the FSCS cover).

john_s_2

I said it earlier, but I think it warrants saying again. As much as it pains me to say it, I would prefer to pay a fee to a bank to look after my savings, than risk holding it in cash at home. It could get stolen, or damaged in a fire (or my wife might find it ;-) and I'd be left with zip, nothing, not a bean.

Someone said I could buy a safe with what the bank would charge me - I just checked and they're actually cheaper than I thought!

http://www.acesafes.co.uk/shop/details.asp?rangeID=7&myDetails=Secureline%20Trend%20II%20Range%20by%20Chubb

But add on to that the cost of having it professionally fitted into my house (I assume it needs to be bolted into an external wall?) - I'm guessing we're talking a few hundred pounds at least?

I'm reckoning on paying a tenner or so a year to the bank. I must admit, if they charged me 100s of pounds I would definitely go down the professionally installed safe option! I'm talking about savings of less than £20K here.

EDIT: And thinking about it, I'd need to transport the cash from the bank to my house. I'd be sorely tempted to pay someone to help me do that (especially if they were insured against losses). Sod's law dictates I would get mugged on the way back! Especially as criminals would be watching the banks like hawks for people who're taking out large cash sums. (I can't believe I'm even half-seriously thinking about all this...)

Juddster

I agree with the above post by John s.

I have no idea whether banks will start charging customers to "look after" their own money, but before we all rush out and start stashing money under our mattresses, just give your insurance company a call to discover just how expensive it starts to get, to insure yourselves against loosing more than a few hundred quid to fire\flood\burglary etc.

Liz_the_Whizz

I was reading predictions today about deflation leading to RPI of -1.2% by July 2009 - this would be interesting in terms of NS&I Index-Linked Certificates (current issue RPI + 1%).

Though in reality the savings rate applied would presumably be zero, in effect savings rates could at least notionally be below 0%.

Mind you, having updated my savings spreadsheet today, couldn't help but notice how many banks and building societies are already offering interest rates of 0.1% on their "inertia" accounts, ie the ones where they rip off pensioners etc.

At least none of mine are that bad - yet;) .

gonzouk

I doubt there will be a big drop on Thursday, maybe .5 at most. The government has been getting flack over how savers are being treated, and the xmas sales figures weren't that bad and shows people are spending - i think without that they would have gone 1% (and they may still do) but i just don't see it happening this month.

nicko33

Liz_the_Whizz wrote: »

I was reading predictions today about deflation leading to RPI of -1.2% by July 2009 - this would be interesting in terms of NS&I Index-Linked Certificates (current issue RPI + 1%).

This has been covered before
if RPI goes negative, the return would be (current issue 0 + 1% )

like mortgages that won't reduce the rate below a certain level
the RPI element of the return of ILSC does not go below zero
and you always retain the fixed +x%

nicko33

Lokolo wrote: »

What? No. I said my savings. Not my general spending money.

Banks won't survive without savers money. How will they lend out money without any to lend out? They make huge profits from loans amd mortgages, which they won't do if people withdraw all their money.

Make your mind up.
You can't leave your general spending money in the bank if the banks haven't survived the exodus of savers.

Lokolo

nicko33 wrote: »

Make your mind up.
You can't leave your general spending money in the bank if the banks haven't survived the exodus of savers.

Eh?

By that time it won't matter because pay won't go into banks etc. the effect of people taking savings out to banks failing isn't instant. I will still take my savings out, then months later you will see banks starting to go AHHHH we need money to lend out to get profit, and change rates back.

Bank aren't going to have negative interest rates. If in 6 months/a year they are I will quite happily take my comment back, otherwise I expect a nice big 'You were right'

Icesaver

Just a thought. For those of us that are taxed on our savings, would the taxman owe us tax if the interest rate on savings went -ve?

Scary_

What about mortgages under a negative percentage rate? It would never happen, but theoretically we could be paid interest on our mortgages and pay interest on our savings.... which as everyone owes more than they have saved means we'd all be better off :rotfl: