Negative interest rates

Pingu1

Hello, I've seen a few reports that the BoE is more than considering introducing negative interest rates. I have a feeling it might happen January/February. I have a 5 figure sum in a Nationwide savings account, left over from when I purchased my home in 2014. I don't add to it, although it has had a small amount of interest each year which I usually spend/invest on something. Its just parked there. With negative rates, I'm worried I will be charged to keep it in the account (and also the funds in my current account). I did read an article from the summer from Nationwide saying they wouldn't charge customers, but its 2020 and I can't be sure. What are my options? Can anyone advise. My immediate thought is to buy a small safe, withdraw all of my funds in cash and hide it under the bed.

csgohan4

premium bonds? Wait for the announcement, otherwise speculating

george4064

What are you plans for this ‘5 figure sum’? Will you be shortly buying a property with this money?

Find the most suitable saving account(s) for you here: https://www.moneysavingexpert.com/banking/

If it were me and planning to buy within the next 5 years, I would split the money between premium bonds and fixed saving accounts.

John464

I think it highly unlikely we will be charged to keep money in retail savings account.
But if we were I would rather pay it than take all the risks of holding physical cash.

EdGasketTheSecond

You are getting charged anyway in effect due to inflation devaluing your cash over time. There won't be an actual charge on personal savings imho.

Bravepants

Negative interest rates are to do with the BoE charging retail banks to hold their money on deposit. The BoE would charge negative interest to the retail banks for this to encourage those banks to lend their cash out to businesses thus stimulating the economy.

wmb194

There are other threads on this; 1., worry about it when it actually happens, 2., the experience in the eurozone is that negative rates are only being charged on large balances e.g., ING in The Netherlands >€250k and even then only 0.5%.

grumiofoundation

Pingu1 said:

Hello, I've seen a few reports that the BoE is more than considering introducing negative interest rates. I have a feeling it might happen January/February. I have a 5 figure sum in a Nationwide savings account, left over from when I purchased my home in 2014. I don't add to it, although it has had a small amount of interest each year which I usually spend/invest on something. Its just parked there. With negative rates, I'm worried I will be charged to keep it in the account (and also the funds in my current account). I did read an article from the summer from Nationwide saying they wouldn't charge customers, but its 2020 and I can't be sure. What are my options? Can anyone advise. My immediate thought is to buy a small safe, withdraw all of my funds in cash and hide it under the bed.

1) move out of nationwide ASAP and get ~1% in easy access/notice or premium bonds (premium bonds not guaranteed but over long enough with 5 figure sum would 'expect' to get 1%).
https://www.moneysavingexpert.com/savings/savings-accounts-best-interest/#easyaccesstable
https://www.moneysavingexpert.com/savings/premium-bonds/

2) If you want to guarantee interest you could open a serious of fixed rate savings account. Obviously may not be suitable if you are looking to spend the money soon (but in this case the interest rates less of a concern).

3) Even if negative rates are bought in by BOE the chance of them being passed on to savers is quite low, especially initially (see above first people to be charged will be those with 6+ figure saving).

4) Even if they are bought in across the board (unlikely)
Say best rate can find is -0.1%.
On 50,000 this is £50 for a year - how much will a safe cost, will you insure this cash (I would), how much will this cost?

EdGasketTheSecond

Bravepants said:

Negative interest rates are to do with the BoE charging retail banks to hold their money on deposit. The BoE would charge negative interest to the retail banks for this to encourage those banks to lend their cash out to businesses thus stimulating the economy.

I get the idea but won't encouraging banks to make more dodgy loans than they are happy with to avoid negative rate charges just lead to another credit crunch like GFC1? It was bad loans that kicked that off and now the gov't is encouraging more of the same?

Bravepants

EdGasketTheSecond said:

Bravepants said:

Negative interest rates are to do with the BoE charging retail banks to hold their money on deposit. The BoE would charge negative interest to the retail banks for this to encourage those banks to lend their cash out to businesses thus stimulating the economy.

I get the idea but won't encouraging banks to make more dodgy loans than they are happy with to avoid negative rate charges just lead to another credit crunch like GFC1? It was bad loans that kicked that off and now the gov't is encouraging more of the same?

Yes, but unfortunately it's the way the economy works.

EdGasketTheSecond

hmm crash on then; Q1 2021, again imho