Risk of negative interest rates? Will we all be keeping money under our beds rather than the bank?

[Youngatheart00]

Been reading in the paper that the Bank of England are signalling they may cut rates to negative. This would technically mean you could be charged to keep money in the bank.

Interested in opinions on whether people think this would happen and whether it would be for businesses or individuals as well.

It kind of blows my mind a little tbh! Tho lenders will still be cleaning up on debt interest so it seems harsh to charge customers to lodge cash. Also wondering what they would do to prevent ‘a run on the bank’ which would cause chaos?

If this happens, I think people will end up drawing their money out

But saying that, aren’t they talking about doing a possible cashless system where they can?

Hmm where else would we keep it? Peer to peer lending sites maybe?

That’s a really good (and unnerving point) - how does the ‘under the bed’ method work in a cashless society?! I very rarely use cash so I wouldn’t be keen to withdraw huge chunks of it.

The peer to peer sites too risky for me, plus I’ve heard it can be difficult to get your money back out!

I rarely use money either much preferring to use my iphone or contactless

But I refuse to pay for my own money!!

I’ll take it out of the bank if I’m charged for keeping it in the bank . It’s a ridiculous idea !

Probably just for businesses first.

Unless you get paid for having a mortgage, then it's not really "negative interest rates", just a bank change by another name for people who fall for that sort of thing.

in real terms, rates have been negative for years. I can't remember when a savings rate matched real inflation (generally 3% or more) let alone the massaged figure given as the actual one.

bank and government hate savers for some reason. Want us all pissing money away in pubs, I suppose.

NS and I bonds

@SerendipityJane not quite sure what you mean? There’s nothing to ‘fall for’, the concept of negative rates is a very real thing, driven by central banks and has already been seen in Europe.

No one would ever be paid to have a mortgage as the lenders margin is on top of the base rate, but maybe borrowers will actually be charged more to compensate for banks NOT charging those with credit balances.

@mencken it’s a very valid point. And it makes no sense, as there’s very little safety net when you do fall on hard times. They encourage debt and spending......but you’re then on your own if you lose your job and can no longer afford your repayments.

Hence you take responsibility for yourself and save....but it’s discouraged!! The economy is officially broken.

Premium bonds for me. Winning most months and I've nowhere near full holdings.

One of the many reasons you don’t want to have a cashless society! I like to be able to have a material form of my money when required, not have to rely on a third party bank, etc. I could see burglaries increasing though...

But don't most people have more debt than savings, as in mortgages? We owe about 74k on our house still so would negative interest rates be good for us, at least when our fixed rate is up?

The vast majority of my savings are in premium bonds so I'll just keep them in there

People can’t withdraw all their money because it doesn’t exist. This is what happened in Russia, people tried to withdraw their money but the bank ran
out of physical cash to give them.

All money is literally just numbers moving around on ledgers and the bank probably has 10% of the balance they hold as actual physical cash. We will not be able to get all this money out.

@cptartapp

Premium bonds for me. Winning most months and I've nowhere near full holdings.

I was bought PB’s when I was born many moons ago, I’ve never won a single penny.

In countries where that has happened, there are typically rules that mean it doesn’t affect your average retain banking set up. The negative fees only kick in where there is a significant amount of money, 1m for example. Most people with that kind of money have it invested anyway.

*Retail banking

It's to encourage borrowing and therefore investment. I don't think it would have much impact on normal people, but clearly if you've got £500k in the bank, invest it in shares or spend it, that's what they want you to do, not keep it under your bed fgs!!

And no, the bank won't pay you to take out a mortgage

If interest rates go much lower, our mortgage will be interest free, it's currently 0.48%, I think there is a clause saying it can't go below zero.

The average person doesn't need to worry about negative interest rates, these will only apply above a large amount, so people with above the limit are likely to invest or buy assets like gold or property.

It will still be worth saving something as even if the money doesn't earn interest, it is still available as an emergency fund or to save for a large purchase without borrowing.

It would be such a silly thing to move your money out of the bank, if we all did this the economy would suffer more!

Several countries already have negative interest such as Denmark. You effectively pay the bank a small amount for looking after your money. A pain, but I'd rather do that than have thousands under the bed.

Oh for the days when you could bung your savings in at 6% in the building society.

*No one would ever be paid to have a mortgage "

Although distinctively unlikely, it's not completely impossible. If you have a tracker mortgage at, say, 0.5% above base rate, and the base rate dropped to minus 1%, unless there's a caveat on the mortgage contract that prevents it dropping below a minimum, the mortgage rate would become minus 0.5%.
Which is why, as base rates have flatlined and negative rates have become a reality, tracker rate mortgages have all but disappeared, to protect lenders from this possibility.

As the OP says, the economy is truly broken. Borrowing rates no longer reflect the base rate, they're way higher, so dropping the base rate doesn't stimulate the economy in the way it used to as for most people the cost of borrowing doesn't come down.