Negative Interest Rates

[MonkeyLove]

Seems the Bank of England are seriously considering it?

Bank of England paves way for negative interest rates

Governor says all options are open after UK sells first ever bond with negative yield

www.theguardian.com

Does anyone know what the practicalities of this would be? Will it actually reach consumer banking and in essence you would pay a tiny amount on your balance for them to keep your money?

It seems utterly pointless as the financial sector seems to be ignoring the base rate anyway. Santander wrote to me the other day to say I’m still getting 0.6% interest and the best rates for mortgages even at 40% ltv are 1.16%

I know the base rate affects wider markets but for restarting consumer spending which is the BOE and governments main aim it seems banks are just ignoring the 0.1 level anyway. Only people benefitting will be the small minority on very attractive trackers. @HellsBells @monkeytassle thoughts?

 

[monkeytassle]

Seems the Bank of England are seriously considering it?

Bank of England paves way for negative interest rates

Governor says all options are open after UK sells first ever bond with negative yield

www.theguardian.com

Does anyone know what the practicalities of this would be? Will it actually reach consumer banking and in essence you would pay a tiny amount on your balance for them to keep your money?

It seems utterly pointless as the financial sector seems to be ignoring the base rate anyway. Santander wrote to me the other day to say I’m still getting 0.6% interest and the best rates for mortgages even at 40% ltv are 1.16%

I know the base rate affects wider markets but for restarting consumer spending which is the BOE and governments main aim it seems banks are just ignoring the 0.1 level anyway. Only people benefitting will be the small minority on very attractive trackers. @HellsBells @monkeytassle thoughts?

I put this trade on a fortnight ago. Its way more complicated than you think but simpler. If you Google Charles bean Andrew Tyrie 2013 there's a good paper on it.

Fwiw I don't think they go negative on short term. I think they take base rate to zero and introduce term funding at negative for institutions.

 

[MonkeyLove]

I out this trade on a fortnight ago. Its way more complicated than you think but simpler. If you Google Charles bean Andrew Tyrie 2013 there's a good paper on it.

Fwiw I don't think they go negative on short term. I think they take base rate to zero and introduce term funding at negative for institutions.

Presuming the BOE are trying to stimulate consumer spending though it seems pointless if the financial services sector just ignore the base rate. There is a difference between something being priced in and borrowing and lending rates not moving.

Mortgage rates are pretty much the same now as when the base rate was 0.75 I never 2018. So it seems to be non effective.

 

[monkeytassle]

Presuming the BOE are trying to stimulate consumer spending though it seems pointless if the financial services sector just ignore the base rate. There is a difference between something being priced in and borrowing and lending rates not moving.

Mortgage rates are pretty much the same now as when the base rate was 0.75 I never 2018. So it seems to be non effective.

It in effect penalises banks for having excess reserves and lowers borrowing rates by forcing the banks to hold less excess reserves and lend it out at lower rates.

It's a stupid idea and hasn't worked in Europe.

 

[mysticmackem]

It in effect penalises banks for having excess reserves and lowers borrowing rates by forcing the banks to hold less excess reserves and lend it out at lower rates.

It's a stupid idea and hasn't worked in Europe.

Do you reckon that house prices may rise as private investors pull out of cash and into real estate? I'm also noting the price of gold is also approaching a 10 year high

 

[MonkeyLove]

Do you reckon that house prices may rise as private investors pull out of cash and into real estate? I'm also noting the price of gold is also approaching a 10 year high

Gold was an obvious one. I’d imagine any even slightly savvy investor Could have made a significant profit if they put some money in start of March when this became serious. It’s still the Global safe haven.

 

[Mackem00]

I'm renewing my mortgage in October. Should I be happy or sad about this news?

 

[monkeytassle]

Do you reckon that house prices may rise as private investors pull out of cash and into real estate? I'm also noting the price of gold is also approaching a 10 year high

It's possible for sure. And yes. This is global mega stimulus. No surprise gold is doing well.

I'm renewing my mortgage in October. Should I be happy or sad about this news?

Won't matter. Most floating rates have been pulled and even my 2y fix is now the same as the 5y fix I took 2y ago.

 

[MonkeyLove]

It's possible for sure. And yes. This is global mega stimulus. No surprise gold is doing well.

Won't matter. Most floating rates have been pulled and even my 2y fix is now the same as the 5y fix I took 2y ago.

What would you go for at the moment? I can change now as within 3 months. Tempted to go for a tracker as same rate as a fixed. It won’t drop but gives more flexibility if I want to change providers or similar in future

 

[HellsBells]

Seems the Bank of England are seriously considering it?

Bank of England paves way for negative interest rates

Governor says all options are open after UK sells first ever bond with negative yield

www.theguardian.com

Does anyone know what the practicalities of this would be? Will it actually reach consumer banking and in essence you would pay a tiny amount on your balance for them to keep your money?

It seems utterly pointless as the financial sector seems to be ignoring the base rate anyway. Santander wrote to me the other day to say I’m still getting 0.6% interest and the best rates for mortgages even at 40% ltv are 1.16%

I know the base rate affects wider markets but for restarting consumer spending which is the BOE and governments main aim it seems banks are just ignoring the 0.1 level anyway. Only people benefitting will be the small minority on very attractive trackers. @HellsBells @monkeytassle thoughts?

Personally I think they will just go to zero interest. From a purely practical point of view, many banks’ products and systems won’t be set up to be able to deal with negative interest rates.

 

[Goat Eyes]

What would you go for at the moment? I can change now as within 3 months. Tempted to go for a tracker as same rate as a fixed. It won’t drop but gives more flexibility if I want to change providers or similar in future

I’m switching now to a five year fixed and will save about £2.5k over that time.

 

[MonkeyLove]

Personally I think they will just go to zero interest. From a purely practical point of view, many banks’ products and systems won’t be set up to be able to deal with negative interest rates.

Again, banks don’t seem to be anywhere near the base rate for borrowing or lending anyway

 

[king of the road]

I put this trade on a fortnight ago. Its way more complicated than you think but simpler. If you Google Charles bean Andrew Tyrie 2013 there's a good paper on it.

Fwiw I don't think they go negative on short term. I think they take base rate to zero and introduce term funding at negative for institutions.

What kind of doublespeak is this?

 

[Charmless Man]

I also want someone to tell me which mortgage product to go for please

Two year fix ending in Aug. Same lender has better rates available now for a five year fix with no fee. Looking at keeping the place for a while as a rental income. Seems a sensible option.

 

[monkeytassle]

What would you go for at the moment? I can change now as within 3 months. Tempted to go for a tracker as same rate as a fixed. It won’t drop but gives more flexibility if I want to change providers or similar in future

I have gone for a 2y fixed but that's because I'm adding a wee bit of borrowing to an existing 5y fix.

What kind of doublespeak is this?

Read Charlie beans letter. Getting your head around negative interest rates and the tiers in money markets is hugely complicated but if you switch reserves to cash its very simple.

Personally I think they will just go to zero interest. From a purely practical point of view, many banks’ products and systems won’t be set up to be able to deal with negative interest rates.

If banks have European entities they've been doing this for years but places like Yorkshire building society will have issues yes.

I also want someone to tell me which mortgage product to go for please

Two year fix ending in Aug. Same lender has better rates available now for a five year fix with no fee. Looking at keeping the place for a while as a rental income. Seems a sensible option.

Nobody can tell you but I like knowing my annuities hence going for fixed rate. Unlikely but let's say the pound collapses and the mpc hike rates to defend it and you're on a tracker. This has happened.

 

[Charmless Man]

Nobody can tell you but I like knowing my annuities hence going for fixed rate. Unlikely but let's say the pound collapses and the mpc hike rates to defend it and you're on a tracker. This has happened.

I know, hence the smilies. I feel exactly the same as you, it'll definitely be a fixed rate but its the length I'm humming and hahing over.

 

[Kennington Kid]

Personally I think they will just go to zero interest. From a purely practical point of view, many banks’ products and systems won’t be set up to be able to deal with negative interest rates.

At the last financial crash a mate of mine had just taken out a five year mortgage at BoE base - 0.5%, when that became the base rate his provider wrote to him and stated their system couldn't handle that and they would be charging him a nominal 1p per year interest but would credit his account with the 1p manually.

 

[HellsBells]

Again, banks don’t seem to be anywhere near the base rate for borrowing or lending anyway

My Virgin Money IsA dropped from 1.45 to 1.01 yesterday but yes, they’re still not close.

If banks have European entities they've been doing this for years but places like Yorkshire building society will have issues yes.

Entities with aligned IT systems and products, aye.

 

[monkeytassle]

I know, hence the smilies. I feel exactly the same as you, it'll definitely be a fixed rate but its the length I'm humming and hahing over.

If the 2y rate is within spitting distance of 5y and you expect to stay there for more than 5y personally I'd take the 5. Only reason I haven't is I think we'll be able to repay the mortgage when the 2y fix ends with no charges. It's very personal though

 

[HellsBells]

At the last financial crash a mate of mine had just taken out a five year mortgage at BoE base - 0.5%, when that became the base rate his provider wrote to him and stated their system couldn't handle that and they would be charging him a nominal 1p per year interest but would credit his account with the 1p manually.

That absolutely does surprise me in the slightest.