Won't it make a run on the banks more likely...

Chris2685

... if interest rates are lowered anymore?

Less and less people will be opting to put their hard earned savings into bank accounts, so surely reducing interest rates even more is counter-productive and would be brinking on the edge of a full blown run on every bank in the UK?

Or am I being over-the-top?

I personally would move all my savings out if interest rates do hit zero...

I was just considering it while I was reading this article:
http://blogs.ft.com/economistsforum/2008/11/the-case-for-negative-interest-rates-now/

beecher

Where would you put your savings? I have savings for an emergency and so would keep them in a bank regardless of interest rates. There are still savings accounts paying 5% anyway and mine's paying 6%.

I get your point, but am not sure how many people would withdraw their savings even if (when?) base rates do hit zero.

ad9898_3

This, to me is where my thoughts have been lately, Brown is busy trying to bail out the indebted, to try and re-inflate the bubble ready for the next election, the thing is, it's not working. I would argue that the people benefiting from reduced mortgage payments and so in theory have more money to spend, is at least balanced out, if not outweighed by the people who rely on savings interest (pensioners etc..), who have now cut back drastically on what they spend.

The double whammy is that I would guess a large proportion of those people who have SVR, tracker mortgages etc... are paying down their debt, rather than spending, which is exactly what I would do those circumstances, the problem is it doesn't help Brown get re-elected (lets face it, that's his priority).

lostinrates

I'm not getting good interest rates now. I have to admit I'm thinking about filling DH and my premium bond allowance. We'd risk getting nothing, but their would be the potential of winnings, where as now we get ...not enough to count it really. I don't want to lock for a year for decent rates because I might want to buy before them, but waiting for a month for the check from NS and I would be feasible.

Old_Slaphead

If reducing the bank rate from around 5.5% to 1% hasn't worked then I don't see how cutting another 1% would make much difference.

Anyway reducing by another percent wouldn't make much difference to savers as many are receiving negligible interest and therefore there's not much scope for them to be reduced much further. Banks & BSs need to maintain their margins so it's unlikely that the vast majority of mortgages would be reduced either.

If savers chose to keep their savings in cash then presumably it would be boom time for burglars and insurance companies (who would no doubt justifiably increase home contents insurance significantly to accomodate the extra risk). (Also if the money was nicked - what proof would you have as to your cash holding?)

JFC_2

I aggree with the OP, what is the point in leaving your money in the bank, if there is no interest? You may be better of placing it in a locked secure safe.

dandy-candy

Why take your savings out of the bank to put in a wall safe? You will still get 0% interest in your safe and the temptation with cash in the house is to dip into it, when it's in the bank I try to "forget" it is there! Also if you shut the account you have all that paperwork to reopen an account again when interest rates do eventually start moving up.

beecher

JFC wrote: »

I aggree with the OP, what is the point in leaving your money in the bank, if there is no interest? You may be better of placing it in a locked secure safe.

I don't see the point in taking it out. What benefit do you get from holding it in a safe? People would be much more likely to dip into savings if they were kept in £20 notes in the bedroom!

milliemonster

ad9898 wrote: »

This, to me is where my thoughts have been lately, Brown is busy trying to bail out the indebted, to try and re-inflate the bubble ready for the next election, the thing is, it's not working. I would argue that the people benefiting from reduced mortgage payments and so in theory have more money to spend, is at least balanced out, if not outweighed by the people who rely on savings interest (pensioners etc..), who have now cut back drastically on what they spend.

The double whammy is that I would guess a large proportion of those people who have SVR, tracker mortgages etc... are paying down their debt, rather than spending, which is exactly what I would do those circumstances, the problem is it doesn't help Brown get re-elected (lets face it, that's his priority).

Precisely what I'm doing, we are fortunate in that our mortgage payments have reduced by half in the last year but instead of spending that money or saving it, I am massively overpaying our debts to reduce them before the mortgage eventually goes back up again. Whilst our overspending contributed to the boom of the economy over the past 10 years (in fact I'm sure during that time I solely kept certain fashion retailers in business), there is no way I am prepared to line the pockets of the greedy credit card companies anymore

stonethrower

why not try premium bonds no interest but a chance of winning money

Pennywise

Well, we're on a spending spree if no-one else is. We've just bought a brand new car, spent £17k on renovating our house, and bought all sorts of other smaller items, such as a new computer, furniture, jewelery etc. We're about to spend the rest of our savings as the deposit for buying a new house, on which we'll be spending £50k on a huge extension. We've taken the view that there is absolutely no point in trying to save money, either as savings in a bank, in stocks & shares nor as a pension. We've saved all our lives and we've lost money time and time again (Equitable Life, stock market, etc), so we've had enough and are going to live life to the full now. It's a brilliant time to spend money - a couple of years ago, we couldn't get a tradesman for weeks and then they'd charge a fortune - now we can get a plumber or electrician the same week at far fairer rates. We got thousands off the price of our car and bought loads of things in the sales (not wasting money on things we didn't need, but just bringing forward purchases that we'd have to make anyway in the future). I can see the real value of sterling plummeting due to the prospects of hyper inflation, crazy interest rates and exchange rates.