Negative Interest Rates - Bank of England.

[ChocoTrio]

We’re looking at negative interest rates, Bank of England’s Andy Haldane says

Traders bet on Bank of England launching negative interest rates

Just read about this. There have been threads on this forum predicting an increase in interest rates and therefore increased inflation to cause for property prices to decrease.

What happens if it goes the other way, as being suggested by the Bank of England? Does that mean property prices will increase?

I know very little about economics, but there seem to be a few economists and quants on this forum.

Base rate cut does not necessarily translate into mortgage rate cut. Recent rate change was one example.

A bigger factor is required LTV. If banks decide to stick to 85% or even 80% max then there will be fewer buyers for the same price range which mean market either stagnant if little forced sales or decline if there are sufficient forced sellers. The latter depends on unemployment level after furlough ends among other factors.

If banks introduce 100% mortgage or government expand help to buy then price may rise as more buyers can “afford” a certain price range. I am not convinced banks have apetite for such generous mortgages and for government interferences I really don’t know.

By the way negative interest is nothing new. European Central Bank had it since 2014/2015

It sounds like it's a bad idea for the sterling, especially with Brexit looming as well...

"There are so many problems with negative interest rates that it’s hard to know where to start. It’s terrible for the banking sector, for a start, and given that it’s hard to have a healthy economy without a healthy banking sector (banks are still the main mechanism by which central bank policy is transmitted to the rest of us, after all), that’s not a great idea.
But there’s a much bigger risk here too – and that’s trust. Money is a social technology. It’s a set of rules that we all broadly agree on. It’s easy to forget that there is nothing inevitable about these systems, but the fact that every paper currency in history has eventually foundered – along with the systems they were part of – is clear evidence that this stuff only works by consent."

What are negative interest rates and could they happen here : Negative interest rates – where banks pay you to borrow money – now exist in many parts of the world. John Stepek explains why they are a terrible idea, and how likely we are to see them in the UK.