Less than 0% interest

wmb194

The ECB has had negative rates for a while and we can look at what's going on on the continent to give us some clues e.g., in the Netherlands the best instant access rate is 0.2% from, amusingly, a Lloyds branded Bank of Scotland account, and the best fixed rate deposit is 1.25% over 10 years from Credit Europe Bank. The fun thing about the site linked below is that if you click on the links to the accounts it will give you their rate history: at the end of 2009 Credit Europe was paying 5.5% over ten years. The big banks like ABN Amro are offering no interest up to €2.5m and then -0.5% on balances above this.
http://www.spaarinformatie.nl/

http://www.spaarinformatie.nl/sparen/rekeningen/info/466-Credit-Europe-Bank-Termijndeposito
https://www.abnamro.nl/en/personal/interest/current-interest-rates.html

swaledale_one

Surely everyone will just stick all their money into ns&i that way you at least get a chance of winning something

dunstonh

Banks still need deposits to be able to lend to consumers.     So, if the main base rate goes negative, it does not necessarily mean deposits will go negative.  

However, there are secondary rates that can be used to ensure that the negative rate is targetted rather than universal.  So retail consumer deposits up to a certain amount could be set to not be negative but commercial rates or larger deposits are.   There are a number of different ways it could be implemented.

Whilst negative rates are a possibility, it is also likely that there will be a willingness to allow inflation to rise to erode debts in real terms.  Especially if Government borrowing caps inflation-linked borrowing.  Something both the UK and the US have done in the past and effectively created a haircut on Government debt without actually technically defaulting.

Surely everyone will just stick all their money into ns&i that way you at least get a chance of winning something

NS&I would likely be closed for new money.

Thrugelmir

Shankers said:

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.

Your money is held on your behalf by HL. If they are charged as a corporate customer this will be relayed onto you. 

ProDave

swaledale_one said:

Surely everyone will just stick all their money into ns&i that way you at least get a chance of winning something

The logical "negative rates" version of that, is if you "win" you pay them.  Just pray you don't "win" the big one.

Aretnap

Shankers said: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. 

Not at the moment. However HL can change their fee structure if they give whatever notice their T&Cs require. As above, if it costs them money to hold cash that cost would be passed on to the consumer one way or another. 

Mickey666

Would it really matter all that much?  Cash in the bank is already a depreciating asset if you take inflation into account but there doesn't seem to be a mad rush to withdraw savings.  Having said that, negative interest rates could be a psychological issue that panics people into action.

yellow1231231

Surely everyone will just stick all their money into ns&i that way you at least get a chance of winning something

or other places stock market 

happybagger

As is known, Islamic banks don't pay interest, but an "expected profit rate".
Would they then have to move to an "expected loss rate"?

Sailtheworld

There's an ocean of cash on deposit. Most of it just stays put and probably still would if rates went negative.