Negative interest rates

incandescent

What are the implications for savers if the BoE introduces negative interest rates as has been suggested this week?

Do I need to consider not having my savings in a bank account?

masonic

They have two further cuts they could make that wouldn't take it negative.

BoE base rate is not the same as the rate paid on most bank accounts. Some accounts pay base rate + 4.5%. Bank accounts do not even need to track the base rate. It is unlikely those accounts paying 3-5% will change in the short term whether rates rise or fall.

polymaff

incandescent wrote: »

What are the implications for savers if the BoE introduces negative interest rates as has been suggested this week?

Do I need to consider not having my savings in a bank account?

One of the things that the recession has significantly furthered is the decoupling of savings rates from base rate. The rate savers should watch is the one for the Bank of England's accursed Funding for Lending Scheme.

MDMD

I would be very surprised if they did go negative. Despite the 'independence' of the BOE, the government would be terrified of a run on the entire banking sector so they would put immense pressure on the BOE to keep them positive. Even if a lot of bank accounts wouldn't be negative without a large fall, the speculation would be enough to cause panic.

teddysmum

The BoE people are at odds about whether interest rates will go up or down, so savers may be lucky.

Aretnap

Sweden, Denmark and Switzerland have all had slightly negative interest rates recently, without civilisation as we know it coming to an end.

Significantly negative interest rates though would give savers an incentive to withdraw their money as cash and keep it under the bed. It's hard to see how they could work without cash being abolished first, which is why they're likely to remain a subject of academic discussion rather than a serious policy suggestion for quite some time.

Mountaingirl

In Switzerland the negative interest rates have only been affecting businesses who put their spare cash on short term deposit at the banks. Private accounts are not affected.

jimjames

incandescent wrote: »

What are the implications for savers if the BoE introduces negative interest rates as has been suggested this week?

Do I need to consider not having my savings in a bank account?

I'd consider not having my savings in a bank account if it didn't pay a decent rate. Luckily mine pays 3-5% so I'm sticking with it. If your bank account pays less then I'd move your savings.

globalds

Interest rates only go negative because of deflation ..Deflation makes your mortgage more expensive than you think . Or any loan.

Pincher

BBC Radio 4 MoneyBox 19th December 2015, from time stamp 18:30 (18 minutes from beginning).


Also,


http://www.thisismoney.co.uk/money/news/article-3329324/Swiss-bank-ABS-hit-savers-negative-rates.html


A tiny Swiss bank is believed to have become the first to hit savers with negative interest rates – charging them for taking their money.
The Alternative Bank Schweiz wrote to customers telling them they would face a -0.125 per cent rate on their money from 2016 – and a -0.75 per cent rate on deposits above 100,000 Swiss francs.

JohnRo

The journey towards a centrally controlled cashless economy are already well advanced. The benefits for increasingly totalitarian corporate/government partnerships are just too tempting, it extends the surveillance state to almost everyone and creates opportunities to threaten and punish people with being switched off.
Negative rates are just outright theft, on top of the well established wealth transfer effects of issuing new bank tickets out of thin air.