NEGATIVE INTEREST RATES

Sibbers123

coachman12 said:

I provided my overall assessment a few posts back on this thread and I repeat that BoE negative rates may well be on the way and that any Chancellor worth his salt would be incompetent if he did not take such action ( or at least carefully consider it ) during this current emergency . It makes absolutely sound economic sense. The BoE's primary job, above all else, is to keep prices across the economy rising steadily every year. The Bank's inflation target is set at 2% by Govt and in the present climate it is failing to be met.
If inflation remains low for too long, bosses start factoring that into pay reviews. This can then dampen consumer confidence and spending. 

Sweden, Switzerland, Japan and the 19 nations of the eurozone all took interest rates below zero. In Switzerland, negative interest rates have also helped to discourage investors from pouring money into the country during times of uncertainty.

In the UK we must stop people saving and get them spending---it is essential if we are to be able to follow scientific advice and stop mass pandemic deaths. And to anyone like me, who thinks anti-Covid measures should be made more stringent, it is doubly necessary that the economy is kept as healthy as is possible ( which is not very healthy but as good as we can manage) by going down the path of BoE interest negativity.

Of course, it is all a lot more complex than that , but the above is an adequate summary IMO.

The difficulty comes in guarding High Street Banks and financial institutions from getting into a mess. Said banks could be paying people to take out loans, they could see savings accounts being emptied ( that's why I think BoE negative rates will not be passed on in full to savers by the banks) and the overall fragility of the banking sector must be protected. But that is for another discussion elsewhere perhaps.

But overall, we must head towards BoE negative interest rate IMO and just as a matter of simple economics.

It will be catastrophic for banks. They will be losing money and at the same time, mass withdrawals of cash from the bank. They’ll have to limit cash withdrawals.

If my savings account has a negative interest rate, I’d either move it to a bank that didn’t have such measures, invest it, keep it under the mattress or put it in my pension.

The eurozone is riddled with debt, with a few exemptions. They had no option. What’s the long term goal? Interest rates have just kept falling since 2007 and it’s getting to a point of no return. Those in their teens now have very little prospects, except paying back all this debt we are accumulating.

coachman12

I appreciate what you feel, mortgage2020 (don't we all ?) , but emotional frustration just can't alter the economic realities as I set out briefly in my post, though they are far more complex than my summary.

ratechaser

rothers said:

DireEmblem said:

onomatopoeia99 said:

If the base rate goes to -0.25%, theoretically my mortgage rate should go to -0.01%, although I expect there is small print that stops the building society from having to pay me interest on my mortgage.  

How on earth do you have a 0.24% mortgage?

I have a lifetime tracker at 0.17% above the BoE base rate which I got from the Woolwich in 2007. 

I remember the early noughties, when there was a glut of lifetime base rate trackers at what now look like silly rates. Every week in the Standard, there were Best Buy tables sponsored by John Charcol, and these products had minimal fees, with a lot even offering free valuations. That's how competitive the market was.

We went for base + 0.5% with Santander, not because it was the cheapest on the market (not by a long way) but because it was a full offset with total flexibility. Definitely the right result in the long run, especially as we paid it off in a few years and then made a very decent return arbitraging Santander's own base rate tracking savings bonds for several more years. 

Can't imagine we'll see the like again (well, we saw how it all ended...) although still have the benefit of a huge cheap borrowing facility for the next 10 years if it's ever needed...

galileangoatee

Technically don't they already charge us... they just call it a "fee". So if their computer systems can't cope, they'll just set the interest rate at 0% and charge a monthly fee instead. Simples.

John464

My understanding is people will only pay to lend you money if you have a very strong credit rating?
https://www.theguardian.com/business/2020/oct/16/uk-credit-rating-downgraded-by-moodys-amid-growth-concerns
Might have been different 4 years ago when UK was still rated AAA?