Negative interest from UK banks?

robatwork

I see the ECB are now "paying" negative interest on deposits from member banks.

I wonder how much of a leap is it to the possible day where we will be paying our banks for the privilege of saving money with them. Probably not as far fetched as we all may have dreamt.....

ceredigion

it could be argued many do already

Archi_Bald

EU: -0.1% deposit rate, 0.5% inflation = 0.6% loss over a year

UK: 0.5% deposit rate, 1.7% inflation = 1.2% loss over a year

robatwork

Very true.

But to get a saver to put money into a bank knowing they will get out less in absolute terms.....there would be a lot of lumpy mattresses suddenly.

kidmugsy

People would use a vault rather than a bank. That might be pretty sensible. Except, alas, so many banks have closed their safety deposits.

aleph_0

kidmugsy wrote: »

People would use a vault rather than a bank. That might be pretty sensible. Except, alas, so many banks have closed their safety deposits.

Except you might have to pay a fee to store the money in a vault. In fact, the fee might be proportional to the amount of money that they're prepared to store/guarantee the safety of. Rather like a negative interest rate, really.

In practice, consumers are irrational, and would probably try to store money in unsafe ways. I can't see negative consumer interest rates happening any time soon (and if they do, we probably should worry)

princeofpounds

In practice, consumers are irrational, and would probably try to store money in unsafe ways. I can't see negative consumer interest rates happening any time soon (and if they do, we probably should worry)

That's kind of the point though isn't it? They want people to save money in more unsafe ways. Like increasingly expensive houses, basically.

Thrugelmir

princeofpounds wrote: »

That's kind of the point though isn't it? They want people to save money in more unsafe ways. Like increasingly expensive houses, basically.

They want people to invest in ventures that create something of value.

gadgetmind

You have to take on more risk to get positive returns, but spreads have narrowed across the board and risk is heavily underpriced.

It's going to get worse before it gets better, and it's going to take some defaults before the majority understand that headline yield isn't the critical factor.