Negative interest rates
Discussion
Anyone want to predict whats going to happen in the next 6 months?
I notice Barclays have reduced their max LTV on additional borrowing, the rates are still crazy low but clearly their appetite for risk is shrinking.
If houses prices collapse by 10%+ over the next 12 months which way is interest rates going?
Is it flip a coin time soon?
I notice Barclays have reduced their max LTV on additional borrowing, the rates are still crazy low but clearly their appetite for risk is shrinking.
If houses prices collapse by 10%+ over the next 12 months which way is interest rates going?
Is it flip a coin time soon?
anonymous said:
[redacted]
you wouldnt what? spend your savings, or borrow cheaply?A few years ago i took a loan out instead of use my own investments or saved cash. That worked out ok. I basically worked out the interest payment over 5 years was the price of a mobile phone per month. Rationalised that way, the capital is then a straight repayment.
Later, as an experiment when we purchased my wifes car at around 10k we "lent" the money to ourselves at 3% interest rate. I quite liked that, but ultimately only saved the equivalent of a mobile phone. I think next time i may do 50/50 and use some of the short term emergency cash (which is doing nothing presently).
Just different ways of thinking about money and borrowing.
gangzoom said:
Anyone want to predict whats going to happen in the next 6 months?
I notice Barclays have reduced their max LTV on additional borrowing, the rates are still crazy low but clearly their appetite for risk is shrinking.
If houses prices collapse by 10%+ over the next 12 months which way is interest rates going?
Is it flip a coin time soon?
IR are not a function of house prices. As you say, if they think that overall house prices are going to go down they'll reduce their LTV and decrease their exposure to the underlying price, but while they can borrow from the government at 0.25% they'll happily keep lending to you at 1.75%. I notice Barclays have reduced their max LTV on additional borrowing, the rates are still crazy low but clearly their appetite for risk is shrinking.
If houses prices collapse by 10%+ over the next 12 months which way is interest rates going?
Is it flip a coin time soon?
Just had an email from Bullionvault who are starting to charge 0.75% holding fee for €EUR deposits.
email said:
Starting next month, we must apply a currency holding fee to Euros.
This is because, 6 years after the European Central Bank first imposed negative rates, our bank is now applying a negative interest rate to the Client Euro bank account.
So it's affecting trading/investing platforms holding client funds now. As long as paper currency exists I don't see how direct retail deposits can cross the zero bound but private investors being charged to hold cash is definitely now a thing! This is because, 6 years after the European Central Bank first imposed negative rates, our bank is now applying a negative interest rate to the Client Euro bank account.
deggles said:
So it's affecting trading/investing platforms holding client funds now. As long as paper currency exists I don't see how direct retail deposits can cross the zero bound but private investors being charged to hold cash is definitely now a thing!
Interesting isn't it. Nobody's going to want to pay charges for cash deposits so what are the alternatives? Take it out and keep it under the bed, or invest it and try to make it grow... anything else? Will billions start to be withdrawn and invested? Or will people be too lazy and just ignore it? With that and inflation it's a double hit.Simpo Two said:
deggles said:
So it's affecting trading/investing platforms holding client funds now. As long as paper currency exists I don't see how direct retail deposits can cross the zero bound but private investors being charged to hold cash is definitely now a thing!
Interesting isn't it. Nobody's going to want to pay charges for cash deposits so what are the alternatives? Take it out and keep it under the bed, or invest it and try to make it grow... anything else? Will billions start to be withdrawn and invested? Or will people be too lazy and just ignore it? With that and inflation it's a double hit.It's such an obvious solution that I can't help but think we will see negative interest rates in the next few years.
Expect asset prices to rise even more as cash becomes more and more worthless.
Joey Deacon said:
I would imagine the government would love it if all the money that is being hoarded was withdrawn and spent. Negative interest rates would encourage people to borrow more as well as encourage the hoarders to spend, a double win for the government.
It's such an obvious solution that I can't help but think we will see negative interest rates in the next few years.
Expect asset prices to rise even more as cash becomes more and more worthless.
Negative interest rates wouldn't encourage me to spend, because I'd have less money faster. They'd encourage me to find a better home for it.It's such an obvious solution that I can't help but think we will see negative interest rates in the next few years.
Expect asset prices to rise even more as cash becomes more and more worthless.
I'm not sure it's quite fair to call people who save 'hoarders'; they may be planning independence rather than living on the State like the spendthrift and unfortunate.
I can't think that an economy where people just borrow money and spend it is sustainable. If it was that easy we'd all do it.... The First Law of Stuff says it has to be paid back sometime.
Simpo Two said:
I'm not sure it's quite fair to call people who save 'hoarders'; they may be planning independence rather than living on the State like the spendthrift and unfortunate.
I can't think that an economy where people just borrow money and spend it is sustainable. If it was that easy we'd all do it.... The First Law of Stuff says it has to be paid back sometime.
I am a self confessed money hoarder, just like any other type of hoarding it is doing me no good at all aside from a warm feeling when I check my bank balance.I can't think that an economy where people just borrow money and spend it is sustainable. If it was that easy we'd all do it.... The First Law of Stuff says it has to be paid back sometime.
The government are doing a great job of building an economy built on debt, just look at how much they are borrowing for Furlough payments. I am sure they have some plan somewhere to make all this debt disappear somehow.
I am not seeing the people who live their life on debt being punished in any way aside from having a better standard of living that the prudent.
The thing with "money" is you don't want to be left holding it when the music stops.
"Assets" are the place to be. They tend to float on top of the sea of money. The tide comes in, the tide goes out, a storm blows up and then dissipates. But if you own something that remains floating through the upheaval you're in a good position.
What sort of "assets"? It doesn't really matter, as long as they're not "wasting assets" - hence cars, caravans, boats and other consumer goods aren't going to do you any good. They need to be "investment assets" of some kind, whether stocks & shares, real property or something else. Assets which hold the promise of both income and capital gain are particularly attractive.
At the end of the day money is just a pile of paper in a safe or a few digits on a computer screen. Central bank policies through the last decade (zero interest rates) have turned it into Monopoly money, even leaving space for the so-called crypto currencies to be magicked into existence.
"Assets" are the place to be. They tend to float on top of the sea of money. The tide comes in, the tide goes out, a storm blows up and then dissipates. But if you own something that remains floating through the upheaval you're in a good position.
What sort of "assets"? It doesn't really matter, as long as they're not "wasting assets" - hence cars, caravans, boats and other consumer goods aren't going to do you any good. They need to be "investment assets" of some kind, whether stocks & shares, real property or something else. Assets which hold the promise of both income and capital gain are particularly attractive.
At the end of the day money is just a pile of paper in a safe or a few digits on a computer screen. Central bank policies through the last decade (zero interest rates) have turned it into Monopoly money, even leaving space for the so-called crypto currencies to be magicked into existence.
Joey Deacon said:
I am a self confessed money hoarder, just like any other type of hoarding it is doing me no good at all aside from a warm feeling when I check my bank balance.
It might mean that you don't need to work, or can retire early while your mates have to slog until 67+. It can buy you quality of life and options.Joey Deacon said:
The government are doing a great job of building an economy built on debt, just look at how much they are borrowing for Furlough payments. I am sure they have some plan somewhere to make all this debt disappear somehow.
To be fair they had no choice; every other sanguine government has to do the same because the alternatives are worse. I'm sure it wasn't in the Conservative game plan in Dec 2019.Joey Deacon said:
I am not seeing the people who live their life on debt being punished in any way aside from having a better standard of living that the prudent
They pay interest - unless they're serial bankruptees. Given the choice of no money or a big pile, I know which I'd prefer.deggles said:
So it's affecting trading/investing platforms holding client funds now. As long as paper currency exists I don't see how direct retail deposits can cross the zero bound but private investors being charged to hold cash is definitely now a thing!
It already happens in Europe, so it's a dead cert if base rate moves negative. Most of the high street banks are already down to 0.01% on their headline products. Most of the back book products I manage are paying 0.00% at present despite us paying closer to 0.90% on the acquisition side. You wouldn't believe the proportion of banks balance sheets that are made up of entirely disengaged depositors sat for years on meaningless rates. deggles said:
So it's affecting trading/investing platforms holding client funds now. As long as paper currency exists I don't see how direct retail deposits can cross the zero bound but private investors being charged to hold cash is definitely now a thing!
It has been the case that retail deposits in EUR have had charges applied for some time if you’re holding sufficient cash to exceed whatever threshold your bank has in place. If rates went negative here then I’d expect banks to operate the same way. Rates at zero for the majority, but negative if you hold a lot (likely well above the fscs limit).Doesn’t surprise me that trading platforms are already looking at charges as they won’t want clients moving too much surplus cash over to them if they’re the ones bearing the costs of client account cash.
Right so Martin Lewis talking about negative rates coming and banks charging to hold money.
What’s everyone’s plan?
I’m wondering if you can still load more onto a credit card?
Ages ago I went to pay off a credit card and missed a decimal point so ended up with £2k on my credit card. No drama as I just used it to it for things until it was 0 again. Didn’t get charged anything so if banks are going to charge us I will do the same.
What’s everyone’s plan?
I’m wondering if you can still load more onto a credit card?
Ages ago I went to pay off a credit card and missed a decimal point so ended up with £2k on my credit card. No drama as I just used it to it for things until it was 0 again. Didn’t get charged anything so if banks are going to charge us I will do the same.
deggles said:
Just had an email from Bullionvault who are starting to charge 0.75% holding fee for €EUR deposits.
Oh damn that was my kinda back up idea just move the cash to a sit not invested in a trading account.email said:
Starting next month, we must apply a currency holding fee to Euros.
This is because, 6 years after the European Central Bank first imposed negative rates, our bank is now applying a negative interest rate to the Client Euro bank account.
So it's affecting trading/investing platforms holding client funds now. As long as paper currency exists I don't see how direct retail deposits can cross the zero bound but private investors being charged to hold cash is definitely now a thing! This is because, 6 years after the European Central Bank first imposed negative rates, our bank is now applying a negative interest rate to the Client Euro bank account.
So do we think this is coming???
We are now ready to take on some additional borrowing on the mortgage, no issues with LTV or affordability. I can get 7 year fixed at 1.67% which in any other time is a 'bargain', but I don't want to pay 1.67% interest if 0% is coming!!
We have about 6-12 months flexibility for getting the funds. So what what you do, apply now and lock in the 1.67% or wait till spring next year in the hope of even lower borrowing rates??
We are now ready to take on some additional borrowing on the mortgage, no issues with LTV or affordability. I can get 7 year fixed at 1.67% which in any other time is a 'bargain', but I don't want to pay 1.67% interest if 0% is coming!!
We have about 6-12 months flexibility for getting the funds. So what what you do, apply now and lock in the 1.67% or wait till spring next year in the hope of even lower borrowing rates??
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