Negative Interest Rates

yertiz_2

The Bank of England Deputy Governor has said negative interest rates should be considered...
Does anyone have any idea what effect would this have, if any, on Student Loan interest rates? Thanks.
http://www.bbc.co.uk/news/business-21589128

HappyMJ

They would usually be set at zero rather than negative..but depends on when the loan was taken out and what the rate is based on.

yertiz_2

HappyMJ wrote: »

They would usually be set at zero rather than negative..but depends on when the loan was taken out and what the rate is based on.

I have one just finished Uni and another hoping to go this year, so 2 different types of calculations, will just have to wait and see.

amiehall

When RPI went negative, old mortgage style loans had a negative interest rate applied. The newer loans went down to 0% but not below. I think their terms prohibit negative interest rates.

atypical

The student loan interest rate can't be higher than 1% above base rate (it's not actually the BoE rate directly, but the average of the base rate at a number of clearing banks).

Inflation is likely to remain high for some time yet which means the 1% base rate rule will apply. It should apply even if the base rate is negative. Unless the base rate fell below -1% in which case no interest rate would be applied making the rate 0%.

I think this is only the case for post-1998, pre-2012 loans.

Edit: Interesting to note that the 1% rule means that people with post-1998, pre-2012 loans are currently having part of their loans inflated away.