Less than 0% interest

Caney97BVC

The Bank of England has mentioned the possibility of -0% interest rate. How will that effect people with money in savings accounts. Interest rates have already fallen to 0.01%. Any help with an answer appreciated.

grumiofoundation

Already discussed
https://forums.moneysavingexpert.com/discussion/6145025/negative-interest-rates/p1
https://forums.moneysavingexpert.com/discussion/6142669/negative-interest-rates/p1

Probably unlikely banks will actually implement in negative interest rates to retail customers. 

Caney97BVC said:

Interest rates have already fallen to 0.01%. 

No they haven't, you can get 100x this
https://www.moneysavingexpert.com/savings/savings-accounts-best-interest/

eskbanker

Caney97BVC said:

The Bank of England has mentioned the possibility of -0% interest rate. How will that effect people with money in savings accounts. Interest rates have already fallen to 0.01%. Any help with an answer appreciated.

Perhaps I'm missing what you're really asking, but if negative interest rates were introduced for savings accounts then interest would simply be deducted instead of added, so if, hypothetically, a rate of -1% replaced one of +1% then your £100 would become £99 instead of £101.

vernall

surely if negative interest rates happened people would just withdraw their cash lol

kuratowski

vernall said:

surely if negative interest rates happened people would just withdraw their cash lol

That would be good news for burglars, if everyone had thousands of pounds lying about at home.

bowlhead99

kuratowski said:

vernall said:

surely if negative interest rates happened people would just withdraw their cash lol

That would be good news for burglars, if everyone had thousands of pounds lying about at home.

Well, that's probably why world governments are considering negative rates. There is plenty of government support for companies and small businesses (loans etc) and unemployment protection measures (furlough scheme etc), but spare a thought for houseburglars. Their business will have gone through the floor with so many more people being home all the time, leading to a real and practical drop in incomes. Incentivising people to withdraw cash and store it in their homes will at least make the pickings richer for those burglars who are successful in their endeavours.

Alexland

bowlhead99 said:

Incentivising people to withdraw cash and store it in their homes will at least make the pickings richer for those burglars who are successful in their endeavours.

I heard their trade union set a number of rules that homeowners will need to comply with before burglars consider it a safe working environment. They are particularly keen people open windows to allow fresh air...

MaxiRobriguez

vernall said:

surely if negative interest rates happened people would just withdraw their cash lol

Some would stash it under their mattress, quite a few others would use it to pay off debts (which hadn't gone negative) and/or buy assets.

A sizable minority at least would probably retain it in the bank account still, because having a bank account which can be accessed online/app, with the ability to pay on card or withdraw cash in multiple locations and has regulation protection is frankly worth paying a little bit of money for compared to carrying bundles of unsecured cash.

You'd likely find that banks didn't offer negative interest rates, instead they offered an interest rate but a fixed fee per month charge. Combination of both would be a negative interest rate but the headline isn't there and it'd make people feel better about keeping their money in it. 

ratechaser

Alexland said:

bowlhead99 said:

Incentivising people to withdraw cash and store it in their homes will at least make the pickings richer for those burglars who are successful in their endeavours.

I heard their trade union set a number of rules that homeowners will need to comply with before burglars consider it a safe working environment. They are particularly keen people open windows to allow fresh air...

And Mr Boggis from the Thieves Guild will be inspecting properties to ensure homeowners compliance...

(well this was heading into Pratchett territory...)

Aretnap

vernall said:

surely if negative interest rates happened people would just withdraw their cash lol

Withdraw it and do what with it?

If you stash it at home you run the risk of it being stolen, destroyed in a fire etc. Personally I would rather pay the bank a small fee to keep my money safe rather than take those risks.

Some people would doubtless try to mitigate that risk by buying a safe, an alarm systems etc. Their money would still be less safe than it would be in the bank, but they would have avoided paying that small fee by spending a large amount of money instead. Probably they would think that they had got one over on the banks by doing that. People are stupid.

Or some people would probably withdraw it and spend it on stuff, which is precisely what low/negative interest rates are intended to encourage them to do.

(I agree that in practice it's unlikely that a small negative BoE base rate would result in negative interest rates on savings accounts, at least at the sort of balances that most retail savers normally have, but if it did I doubt it would result in any sort of apocalypse).

Shankers

Aretnap said:

vernall said:

surely if negative interest rates happened people would just withdraw their cash lol

Withdraw it and do what with it?

If you stash it at home you run the risk of it being stolen, destroyed in a fire etc. Personally I would rather pay the bank a small fee to keep my money safe rather than take those risks.

Some people would doubtless try to mitigate that risk by buying a safe, an alarm systems etc. Their money would still be less safe than it would be in the bank, but they would have avoided paying that small fee by spending a large amount of money instead. Probably they would think that they had got one over on the banks by doing that. People are stupid.

Or some people would probably withdraw it and spend it on stuff, which is precisely what low/negative interest rates are intended to encourage them to do.

(I agree that in practice it's unlikely that a small negative BoE base rate would result in negative interest rates on savings accounts, at least at the sort of balances that most retail savers normally have, but if it did I doubt it would result in any sort of apocalypse).

I'd just hold any excess cash in something like a HL trading account and withdraw it if I needed it. There are no charges I can see for holding cash on the sidelines in something like a Fund and Share Account. Anyway, I imagine there would still be some fixed rate cash deals with banks if interest rates went negative.