Negative Interest Rates

curehead

Two questions:

Q1: Does anyone on this forum happen to be so lucky to be on a floating rate mortgage of BOE-rate minus >0.5% ? What I mean is, does anyone have a negative interest rate? I would just be curious how this would work practically. Would you receive interest on your mortgage?

Q2: Why do you think that the BOE has not lowered rates to 0% rather than keeping them at 0.5%? I know they started QE instead/in parallel, but why do they not lower it to 0%? Is it a technical issue, ie the above mentioned problem where some lenders would have to pay interest on their loans?

Cheers,
Curehead

opinions4u

curehead wrote: »

Q1: Does anyone on this forum happen to be so lucky to be on a floating rate mortgage of BOE-rate minus >0.5% ? What I mean is, does anyone have a negative interest rate? I would just be curious how this would work practically. Would you receive interest on your mortgage?

Banks charge no interest in these cases. They don't pay the borrower for having the funds.

Q2: Why do you think that the BOE has not lowered rates to 0% rather than keeping them at 0.5%?

Becuase it wouldn't make the slightest difference to LIBOR rates, SWAP rates or rates offered to small companies, big companies and personal mortgage customers taking out new loans. And the impact of a further 0.5% cut on existing tracker deals would only affect a small proportion of borrowers by a relatively small amount. Big QE spreads the benefit better.

These would still more accurately reflect the risk of lending than BofE rates being a fraction lower.