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AIBU?

Share your dilemmas and get honest opinions from other Mumsnetters.

Original poster

To ask about ‘negative’ interest rates?

37 replies

Pottedpalm · 04/04/2021 19:07

I just don’t get it; surely if the interest rate is negative, no-one will invest? I must be missing something..

OP posts:
Original poster
Pottedpalm · 04/04/2021 19:09

Didn’t intend to enable voting.

OP posts:
Whoateallthechocolate · 04/04/2021 19:13

But surely you need a bank account? Where would you keep your money? Under your mattress? Without an account, you wouldn't be able to use a debit card or internet banking. You'd be reliant on cash or cheques, both of which were less common even before COVID and would raise money laundering problems if used for large transactions.

Carrottop73 · 04/04/2021 19:15

Well if all risk free investments/ bank accounts are offering negative rates then the inverter has no option to take the negative rates or put into a riskier investment.

There is a theft risk of hoarding cash that people will pay to avoid.

bp300 · 04/04/2021 19:23

@Pottedpalm

I just don’t get it; surely if the interest rate is negative, no-one will invest? I must be missing something..
Who won't invest? Surely you are more likely to invest and spend if rates are negative?
DrDreReturns · 04/04/2021 19:28

Does it mean we can charge the banks to lend us money?

Tealightsandd · 04/04/2021 19:29

For the last 30 years governments have prioritised borrowers over savers. They want to keep the housing crisis house price bubble propped up at all costs. I can understand to an extent. The economy has a fragile dependence on high house prices but it's a very unhealthy and ultimately unsustainable policy. It's also one that causes a great deal of misery to those priced out of housing.

bp300 · 04/04/2021 19:33

@DrDreReturns

Does it mean we can charge the banks to lend us money?
No. Its the opposite, it will cost you to have money in the bank.
speakout · 04/04/2021 19:34

I will be stashing cash under the mattress

Original poster
Pottedpalm · 04/04/2021 19:37

I mean interest rates on savings and investments. Not on borrowing.

OP posts:
Original poster
Pottedpalm · 04/04/2021 19:40

@Whoateallthechocolate

But surely you need a bank account? Where would you keep your money? Under your mattress? Without an account, you wouldn't be able to use a debit card or internet banking. You'd be reliant on cash or cheques, both of which were less common even before COVID and would raise money laundering problems if used for large transactions.
How would you use cheques without a bank account?
OP posts:
Original poster
Pottedpalm · 04/04/2021 19:42

If my ISA offered a negative interest rate, I would take the money out. Would everyone not do that?
I’m not talking about those with large amounts, just average savings

OP posts:
speakout · 04/04/2021 19:43

I would still maintain a functional bank account.
But withdraw savings.

StrictlyAFemaleFemale · 04/04/2021 19:45

It's to encourage you to spend to boost the economy.

DrDreReturns · 04/04/2021 19:45

Yeah but if you have to pay to keep money in the bank surely the bank would pay you to lend you money.
I'm not being serious btw!

bp300 · 04/04/2021 19:48

@Pottedpalm

If my ISA offered a negative interest rate, I would take the money out. Would everyone not do that? I’m not talking about those with large amounts, just average savings
Only 3% of money is physically in cash so most people will be unable to do that.
Original poster
Pottedpalm · 04/04/2021 19:52

So there wouldn’t be enough cash and people would be forced to pay to keep their money in an isa or savings account?

OP posts:
Sprockerdilerock · 04/04/2021 19:54

They cant do this surely??

ClaudiaWankleman · 04/04/2021 19:54

The European Central Bank has had negative rates for a while now, as has Japan. Neither of these areas charge consumers to hold their money.
Negative interest rates are charged on banks and other financial institutions, to encourage them to lend and offer credit lines as a way to earn interest.

TimeToParty · 04/04/2021 19:55

Large investors like pension schemes and life insurers would remain invested in government bonds (gilts) even if the yield on them is negative because they use them to match their liabilities due eg regular pension payments or lump sums on death.

They aren’t so fussed about getting good returns off them. They might hold other investments like equities to gain additional returns.

TimeToParty · 04/04/2021 19:56

Just thought that was an alternative view on interests rates for non-individuals Smile

ButForTheGrace · 04/04/2021 19:57

The negative rates aren't passed on to the general public - it's aimed at commercial investors to encourage them to spend/invest rather than sit on cash reserves. It's already happening across much of the EU

NoNotHimTheOtherOne · 04/04/2021 19:57

If my ISA offered a negative interest rate, I would take the money out.

And put it where?

bp300 · 04/04/2021 19:57

@Pottedpalm

So there wouldn’t be enough cash and people would be forced to pay to keep their money in an isa or savings account?
Yes most people would be forced to keep their money in the bank.
BarbaraofSeville · 04/04/2021 20:00

In countries that already do this, it's above a threshold, eg £100k, so it won't affect the average saver and people can still bank their rainy day money or mortgage deposit without it shrinking before their eyes. Some people in Denmark are earning money by having a mortgage.

HeyMicky · 04/04/2021 20:04

There was a whole section on R4 moneybox yesterday about this. It manifests as a fee levied on savings over a certain (high) amount. The expert suggested that banks may be charged by the government for holding savings but that this won't be passed to consumers of high street banks.