Negative Interest Rates - What does that mean for Savers?
There a has been a lot of talk in the press recently about the possibility of negative interest rates.
If you are a saver, what does this mean to you?
As of todays date, the Bank of England Base rate is at it’s historic low of 0.1%
If the rate moves into a negative figure, then commercial banks will need to pay the Bank of England to hold the cash reserves with them.
In effect, instead of being paid interest, they will have to pay it out.
If this happens it is likely the banks will in turn pass this onto the retail market – that is you and I.
The prospect of negative rates will come as a further blow to UK savers, who have already has years of low interest rates, and could soon see their savings eroded even further.
While High Street banks pay everyday savers under 1% already, (figures taken from Money Supermarket) these changes, actually penalising savers for holding their money would be unprecedented.
So why would a central bank impose negative rates? The theory is that if savers are charged to save money, they will spend rather than save. In turn, encouraging more economic activity and growth.
In practice, it’s not at all clear that this is what happens. Indeed, some argue that negative rates have the opposite effect. For example, rather than spend money, savers might just save even harder to compensate.
Whatever the Bank of England decides to do with central bank rates, you should always shop around for the best possible home for your savings.
You should also consider why you save – if it is for a specific goal it is important to not lose sight of that.
DO NOT NEGLECT YOUR EMERGENCY SAVINGS
I cannot stress this enough. In these troubled times emergency savings are absolutely essential.
Remember, we are here to help so please get in touch if you want to talk.
Contact us or call Rachael on 01323 436680 and book a FREE initial consultation today.