Negative Interest Rates

[james00]

 

What plans have people got if they start charging you to hold money in the bank? 

 

keep it in there? Take it out? Where will you put it next? What will you buy?

[Gordon Gekko]

There's quite a large difference between the ECB charging Eurozone banks to store their money centrally and the retail banks changing us to rest money in these bank

The latter will never happen

Also from a macro point of view, this'll be negated when ECB intensify their QE anyway. From a personal finance position you may want to worry about when the time comes that BOE increases the interest rate rather than the likelihood of retail banks charging you to have a debit account

[Sole]

I'll invest it all in a company that makes safes.

[Gordon Gekko]

Pmsl pos

[Captain Planet]

Yh won't affect us too much, as it happens banks are to undergo stress testing soon to see if they can stand an interest rate increase by the BoE. Will be interesting to see what comes of that.

Will also be interesting to see what happens at property companies like those where I work as we are levered up to our ears at the moment. Small name companies have lenders changing up to 450 base points over LIBOR, also with a lot of unsecured secondary debt etc.

[james00]

There's quite a large difference between the ECB charging Eurozone banks to store their money centrally and the retail banks changing us to rest money in these bank

The latter will never happen

Also from a macro point of view, this'll be negated when ECB intensify their QE anyway. From a personal finance position you may want to worry about when the time comes that BOE increases the interest rate rather than the likelihood of retail banks charging you to have a debit account

What kind of impact will higher QE on the economy and if interest rates raise what kind of effect will you think that have on the housing economy?

[Gordon Gekko]

I'm a fan of QE to a certain extent but it's just prolonging the inevitable. In the Eurozone's situation I think intensified QE is vital and that it will stem further growth, albeit over a longer period than what it did to the US economy,

I think again an increase in IR, if done properly, isn't going to have a huge adverse effect on the housing market. It's a tricky one for the UK currently because there's such a divide in housing markets between London and up north. London could do with an IR increase whereas up north could do with it staying low. I think the main concern with an increase in IR is 2 fold; firstly on those businesses that are highly leveraged like Captain Planet said (funnily enough I was at a conference today on the current leverage debt markets) and individuals who are leveraged (through mortgages). By the back end of the year a lot of us will be, for the first time in our debt owning lifetime, be having to pay a higher rate on our borrowings and this is where financial management becomes important. If the rates are increased too quickly it'll stifle growth horrendously, if it's too slow then we'll continue to see a frothy market in highly borrowed sectors (housing)

[Badman]

Once the interest rates go up I foresee the house market crashing

 

Its only a matter of time anyway. There is no way the house prices can sustain such inflated growth for so long

 

moral of the sorry?

 

Capitalism doesnt work  

[local]

ur talkin london markets ini

 

we finally had our mortgage approved yday

 

dont wana hear this talk

[Yuri]

There's quite a large difference between the ECB charging Eurozone banks to store their money centrally and the retail banks changing us to rest money in these bank

The latter will never happen

Why not? It happens in a lot of other places

[Captain Planet]

Inflationary pressures for one, inflation is now low hence the opportunity cost of holding cash would be less than saving money.

Capital reserves would be depleted as people save less, banks need capital to function, it would be counterintuitive. Will have negative effects on economic stimuli especially at this crucial time of growth as banks are forced to curb lending in order to meet capital reserve limits and still function. They may even be forced to take up riskier lending en masse to stay profitable.

These are my abstract scenarios.

Basically it's not something to be passed on the consumer in a stable economy like here.

In another country where there is uncertainty in the economy or direct investment is highly risky (crime corruption, infrastructure etc.) or inflation is out of control then yeah the rationale of a retail bank doing that would be justified.

It's basically a bond which ensures your money does not depreciate more relative to the outside world.

[Yuri]

Thanks, interesting

I have a bank account outside the UK and I pay a monthly commission