dpb

I suppose this would bring about a quantum change if it it happens

Will it ? When and how's it going to work

Gear Head

iTrader: (2)

So you lose money if you save it??
I presume you are referring to:
http://www.bbc.co.uk/news/business-21600946

speedking

But great if you can get a credit card at -20% pa

The theory is that the negative rates apply to banks to encourage them to loan out their money to boost the economy rather than sitting on it. A similar effect will be achieved in the High Street by charging for current accounts.

Ray T

Its already sort of true, as inflation is already outstriping "most" savings interest!!

Gear Head

iTrader: (2)

But why are loans seen as a way out of the economic crisis. Surely, 'easy money' is what got us into this mess in the first place.

dpb

It's to encourage people to spend instead of 'save' lol. ,people got cash in the bank

ScoobyWon't

From articles I've seen, negative rates have already been used in Scandinavia and Switzerland, though no figures to show the results of doing so.

TelBoy

Could write an essay on this, but won't.

Negative interest rates have been part and parcel of banking for years now, but probably a new concept for most people. Essentially yes it means you have to pay to keep your money on account. In the Sterling market at present, you can place money with the Bank of England at +0.50% if you have a reserve account (ie big banks only).

There have been reports that the Bank of England have discussed (and to clarify for the hard of thinking from previous experience that does NOT mean they are considering it) negative interest rates, although the first step would probably be 0%. That's in line with the European Central Bank where rates are effectively zero, even though the "official" rate is 0.75%

But until rates go negative, as they have in Switzerland, Denmark etc, people do not change their behaviour, and even then, it's marginal. The cost of transferring capital is too high. Negative rates will not in themselves ensure higher lending, just as Quantitative Easing hasn't. But it's an option, and it's been discussed. Europe is likely to see negative interest rates before the UK, but there's resistance due to the perceived desperation of crowbarring people into lending money rather than relying on the strength of the economy to achieve the same result. For the man in the street, that will mean most banks will charge for current accounts.

Gear Head

iTrader: (2)

So if they lower rates to -1%, does that mean my str mortgage goes down by the same rate?
If supposed to be tracked at 3.75% above base.

f1_fan

iTrader: (9)

I think, and Tel will correct me if I'm wrong, that this is really more to do with large financial institutions hanging onto money. If it costs them to keep it on deposit they will have to find something else to do with it ... like lend it out thereby stimulating the economy.

TelBoy

Absolutely. And if you're lucky enough to have a mortgage linked at less than 1% over the base rate, your lender will be obliged to pay YOU.

TelBoy

Yep, at least in theory. The track record isn't great though, Europe isn't powering ahead just because rates are at 0%. Some argue that rates at -0.50% would start to get things moving, but it starts to raise all sorts of questions about the value of cash deposits, time value of money etc etc. All Western governments are regularly stressing how the low interest rates we're currently seeing are temporary and accomodating in the hope of spurring business into action, but as i've said elsewhere, there is a bigger global shift at work now that short term interest rates won't solve.

Gear Head

iTrader: (2)

The problem is that Halifax recently put this up from 3.25%.
There is nothing to stop them putting it up to 10% above base due to 'increases in the cost of lending'.

EddScott

My mortgage is .99% above base for life.

TelBoy

For life? You have an open ended loan?

EddScott

For life of the mortgage. Its how it is referred to.

Gear Head

iTrader: (2)

One of our directors has this sort of deal.
He has been advised to never fully pay it off (only has a few thousand left on it) as he can also borrow money against his house at the same rate. Lucky bugger.

ScoobyJawa

Mines 2% above base which I think is pretty excellent considering its only a 5 year old mortgage. They changed their policy soon after we got ours!! Don't think I'll be changing it any time soon!! lol

EddScott

Its that rate and the wifes illness policy paying out that makes us able to consider looking at a new house and keeping the current one to let.

We are however part of the interest-only time bomb that will probably start going off in about 15 years time.

f1_fan

iTrader: (9)

I wish I still had a mortgage, instead I had mine when Thatcher had the interest rates at 15.9%.... ah those were the days

AndyBaker

Very nicely put

Matteeboy

If they do, it's time to emigrate. Sick of reckless ****** bring rewarded for being financially retarded.

TelBoy

Only within the industry perhaps. You could not sell financial products stating "for life" if you really mean "for the life of the product". Hence nobody does.

scud8

iTrader: (1)

Very unlikely. If they do bring in negative interest rates they will probably follow what has been done elsewhere, keep the base rate unchanged and introduce a new deposit rate. If they did reduce the base rate any further it would probably be the death knell for a number of smaller building societies.

EddScott

You and I have wasted time in the past arguing over petty semantics - referred to above I believe. Lets not start now theres a good chap.

ditchmyster

iTrader: (7)

WHOPEEEE doooooooooooooo, as you can guess, i have base rate + 0.5

Leslie

If the banks decide to charge us for having a current account, would we still be affected similarly if we put the cash into a building society.

If everyone did that I would expect the banks to be pretty seriously affected themselves.

Les

TelBoy

All well and good apart from the patronising bollocks at the end. Why the need?

Chip

Chill out Tel, I don't think it was meant that way.

Chip

They were the days, when you could buy a 4 bed det for 40k.