Interest rates could go negative – savings warning on keeping money safe | Personal Finance | Finance
It’s almost a yr on because the Bank of England Base Rate was slashed to a report low of 0.1 %. The transfer was made in March 2020 over two successive cuts, and the Bank of England’s Monetary Policy Committee (MPC) has voted to take care of the Bank Rate at this degree ever since.
While the MPC has explicitly mentioned it doesn’t want to “signal” any intention for curiosity rates to go negative, banks have been requested to organize for this measure.
It’s a subject which was lately mentioned by property skilled Louisa Fletcher and mortgage skilled Andrew Montlake lately on The Property Show podcast.
The February 17 episode, which continues to be out there to hearken to now, got here after the Bank of England wrote to mortgage lenders concerning the potential for curiosity rates to enter negative territory.
On the subject of the central financial institution’s current letters, Mr Montlake mentioned: “Part of this, because we’re in a really low interest rate environment, they actually wrote to lenders of banks in October last year.
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“What they have been asking them was, ‘Could you probably be able to cope with negative curiosity rates within the UK?’ Something we now have by no means seen earlier than.
“They wanted to give them a bit of time to get their heads around this because it’s not an easy thing to do. If you think, everything is system generated in computers etcetera,” he defined.
Mr Montlake added that the Bank of England has now rewritten to the lenders, concerning their “operational readiness”.
“Whether or not we will see negative interest rates remains to be seen, but it is a possibility,” the mortgage skilled mentioned.
Mr Montlake additionally supplied a warning to savers, suggesting they do not choose to withdraw important sums and retailer it underneath their mattress.
“If you’re thinking about taking your money out of the bank, if you’ve got savings, and putting it under your pillow or under your bed. Don’t do that.
“That’s not a good suggestion, for the very very purpose that if there’s God forbid a fireplace otherwise you get burgled or one thing like that, your house insurance coverage won’t cowl greater than round about £1,000 in money mendacity round, so it’s going to be gone.”
In agreement, Ms Fletcher added: “So that is actually your savings going up in smoke.”
“Correct, actually. So though it is not going to be significantly worthwhile to maintain it within the financial institution, by all means go out and spend and stimulate the financial system which is what everybody needs, however do not maintain it underneath your mattress.”