Will negative interest rates be forced on us?

UK could follow Japan in bid to revive Covid-hit economy

SAVERS could soon have to pay to keep their money in a bank if negative interest rates are enforced.

Many have suffered negligible rates for more than a decade and most high street banks now pay a pittance at 0.01 per cent.

But experts last night said rewards for starved savers could fall even further still after the Bank of England hinted interest rates could go below zero for the first time ever.

Negative rates have been adopted by Japan and the eurozone in a bid to encourage spending. Silvana Tenreyro, of the Bank’s monetary policy committee, said this weekend that there was ‘encouraging’ evidence the policy could fuel a recovery in the virus-ravaged economy.

A negative base rate would mean the Bank of England would charge banks and building societies to hold money – a cost that could be passed on to customers.

The Bank set the base rate at an all-time low of 0.1 per cent in March in an effort to boost the economy in the face of the pandemic. Interest rates paid on savings have plummeted since.

Rachel Springall, from data firm Moneyfacts, said: ‘Savers might feel like interest rates couldn’t possibly go any lower – but they would be wrong.’ And Andrew hagger, of personal finance website Moneysaid

Comms, added: ‘If negative interest rates were introduced, it would decimate an already depressed savings market with a tsunami of rate cuts.’

Tom Selby, an analyst at investment broker AJ Bell,

negative rates could drive desperate savers to gamble on the stock market. he said: ‘A rate cut will be another body blow for savers who are already struggling to get a decent rate. Indeed, getting any kind of return at all on your money may become all but impossible unless you are willing to take some stock market risk.’

But negative rates should provide relief to struggling borrowers, who could see the interest payments on debts such as mortgages fall.

Anna Bowes, of advice website Savings Champion, said banks could start to charge savers in the way that some current accounts charge a fee.

however, she said there would likely still be ‘plenty’ of providers keen to raise money from savings customers. National Savings and Investments (NS&I) last week announced a raft of brutal rate cuts that will hit its 25million customers – including those who hold Premium Bonds.

Yesterday Bank of England deputy governor Dave Ramsden voiced opposition to setting negative interest rates. ‘We’re not about to use [negative rates] imminently. I see the effective lower bound still at 0.1 per cent, which is where Bank rate is at present,’ he told the Society of Professional Economists.

‘Another body blow’