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Interest rates 2020

Could the UK's credit rating be downgraded, as we are in so much debt and the economy going downhill? This would have the knock-on effect of increasing interest rates. Or is it more likely to go the other way?

The possibility of UK interest rates turning negative is something which Azad Zangana, Senior European Economist and Strategist at Schroders, has considered, as well as examining what it could mean for things such as mortgages and savings.





Comments

  • kinger101
    kinger101 Posts: 6,525 Forumite
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    edited 9 July 2020 am31 6:32AM
    They're all possibilities.  But they're not news.  Just speculation.
    Most variable-rate mortgages already have a floor, so don't expect negative interest rates on those. 
    "Real knowledge is to know the extent of one's ignorance" - Confucius
  • ZeroSum
    ZeroSum Posts: 1,144 Forumite
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    I wouldnt expect savings & mortgages to go negative. Ive heard that most banks systems can't handle negative rates so savings would just bottom out at 0.01%
  • MinuteNoodles
    MinuteNoodles Posts: 1,176 Forumite
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    Savings don't go negative. At worst you'll get 0%. If you've millions in the bank then you may be charged for the banks holding your money but for the vast majority of people in this country all that'll happen is they'll go from next to no interest to no interest.
  • Savings don't go negative. At worst you'll get 0%. If you've millions in the bank then you may be charged for the banks holding your money but for the vast majority of people in this country all that'll happen is they'll go from next to no interest to no interest.
    And if interest rates stayed really low for some time, banks may start charging for everyday operations on current accounts, or have a fixed monthly charge for them.
  • ffacoffipawb
    ffacoffipawb Posts: 3,593 Forumite
    Part of the Furniture 1,000 Posts Name Dropper Photogenic
    Savings don't go negative. At worst you'll get 0%. If you've millions in the bank then you may be charged for the banks holding your money but for the vast majority of people in this country all that'll happen is they'll go from next to no interest to no interest.
    And if interest rates stayed really low for some time, banks may start charging for everyday operations on current accounts, or have a fixed monthly charge for them.

    Well that would make a lot of us trim the number of current accounts we have drastically!
  • Sailtheworld
    Sailtheworld Posts: 1,551 Forumite
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    I don't think we'll see many rates go negative. It would probably be easier to introduce charges on deposit accounts instead.
  • The UKs credit rating(Moodys) is Aa2 but going down, this may affect the cost of the debt to the Government, this may then feedback to consumers? Germanys credit rating is AAA and stable.

  • Aretnap
    Aretnap Posts: 5,546 Forumite
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    The UKs credit rating(Moodys) is Aa2 but going down, this may affect the cost of the debt to the Government, this may then feedback to consumers?
    Or perhaps not. The UK has already seen downgrades in 2013 and again in 2016. The effect on the cost of debt to the government, and on interest rates in general was... nothing whatsoever.
    In truth there is a large captive market for UK government debt. British people and institutions which have large amounts of money that they want to keep very safe have little option but to buy UK gilts. They are unlikely to switch to riskier assets just because Moody's puts an Aa3 instead of an Aa2 next to the UK's entry on the table, especially given the current economic uncertainty. And if they do, the government can always borrow from the Bank of England, as they have during the current crisis. 30 year gilt yields are currently about 0.6%, so the market certainly doesn't seem to think that the cost of government borrowing is going to go up any time soon.

  • Filo25
    Filo25 Posts: 2,139 Forumite
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    Yes with the BoE acting as a backstop in the gilt market, we aren't likely to see spiking rates, irrespective of any change to the UK credit rating
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