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Bank of England Checks Business Prepartation for Negative Rates


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I'd be very surprised if this didn't happen. It won't be passed on to borrowers, but savings rates will completely evaporate and mortgage rates will come down again. I expect lots of behind-the-scenes relaxation of lending rules by banks in their desperation to not keep cash with the BoE.

Combine this with an ill-thought through Generation Buy 95% mortgage scheme and I think a floor will appear under any falls. Unemployment for young people and renters will be brutal, while medium to higher earners will put their savings from no / less commuting into property. Inequality and the generational divide will widen further.

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I'd be very surprised if this didn't happen. It won't be passed on to borrowers, but savings rates will completely evaporate and mortgage rates will come down again. I expect lots of behind-the-scenes relaxation of lending rules by banks in their desperation to not keep cash with the BoE.

Combine this with an ill-thought through Generation Buy 95% mortgage scheme and I think a floor will appear under any falls. Unemployment for young people and renters will be brutal, while medium to higher earners will put their savings from no / less commuting into property. Inequality and the generational divide will widen further.

It will be passed on, but delivered through new 'fees'; Expect the principle of 'free banking' to come under fire. There may be a headline grabbing -ve mortgage (we pay you to be a debt junkie), but expect that to be restricted to 'traditional'  photogenic couples in the Daily Fail.

Relaxation will be given, under a populist 'we can't afford to  remortgage our debt junkie lifestyle..wahhhh' headline.  Nice little distraction for the Sheeple from BoJo.

Wages will be pushed down as employers reduce salaries to reflect lack of commuting.  Home working will push wages further as someone in Sheffield, Nairobi, Sarawak, Durban now race to the bottom.

Higher earning jobs (Doctors, MPs, Lawyers) become more closed shop - keeping jobs for the family and 'like minded' . Their wealth 'surprisingly' moves into areas that don't suffer -ve IR.

 

The UK becomes a South American banana republic.  Lots of military uniforms and faux patriotism to cover any social unrest by 'undesirables'.  UKIP and the Br*xit Party merge and recruit 'volunteers' to help fight against 'lefty leaning agitators'. Suddenly shop windows get smashed and anyone not 'right' suddenly gets a kicking. Immigrants told to keep their head down or go 'home'.  The Tories try to appease by taking on some policies (asylum seekers now processed via the Isle of Man or Arran), but a sudden 'event' pushes them to the side and we have our 'saviour' F*rage take the helm as supreme leader for life whilst the 'purity' division of the UK now 'reclaim' the streets.

 

 

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Negative rates is a psychological barrier more than anything else.

Lower rates as well as QE are a tax on other peoples savings. As I said before the government has to do this in some shape or form. It's the only place where the money is.

fixed

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BoE asks everyone how relaxed and lube'd they are for a massive shafting

 

So much for the UK being a bastion of bettering yourself through work.  Just buy a house, innit?

This is why they are blocking retail investors from Bitcoin, they well performing deflationary assets out of your reach, so your only option is cash which can easily be stolen if kept at home, or spend. Or you leave it in the bank and they steal it at a quicker rate.

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The difference with negative rates is that it is very visible.

For QE, most of the general public don't care about it, understand it or just shrug their shoulders when it happens. Even though it might actually be hurting them more than negative rates. This is of course one reason why they do it.

But negative rates will generate a lot of negative publicity. There will be an army of angry pensioners complaining in the Daily Rage about it.

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The difference with negative rates is that it is very visible.

For QE, most of the general public don't care about it, understand it or just shrug their shoulders when it happens. Even though it might actually be hurting them more than negative rates. This is of course one reason why they do it.

But negative rates will generate a lot of negative publicity. There will be an army of angry pensioners complaining in the Daily Rage about it.

Get another "pensioner bond" issued for NS&I job done. Of course they wont see that as a bung or a taxpayer funded perk.. and still moan.

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Going to be time for me to finally buy it seems -_- 

Buy now. When everyone is trying convert their now loss making STR / FTB fund into a house it will create a huge supply and demand inbalance, which will push up prices. Either that or put into Bitcoin / Gold asap.  

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Going to be time for me to finally buy it seems -_- 

When the last bear turns to bull....

I think inflation will tick up over the next 5 years. Don't think negative rates will last.

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Lots of military uniforms and faux patriotism to cover any social unrest by 'undesirables'.  UKIP and the Br*xit Party merge and recruit 'volunteers' to help fight against 'lefty leaning agitators'. Suddenly shop windows get smashed and anyone not 'right' suddenly gets a kicking. Immigrants told to keep their head down or go 'home'. 

I agree with you.

I foresee some real trouble ahead as more and more people compete for less and less government handouts. I am a white heterosexual middle aged male which means I get to hear the REAL opinions of similar. Not so long ago whilst on site in a professional capacity, another guy (same as me) who was working as a client said the following completely unsolicited and unprovoked:- "Enoch was right wasnt he."

I was a bit taken aback to say the least.

 

See below a slight alteration of your text to describe the last 6 months of fun as perceived by many...

Lots of military uniforms and virtue signalling to cover any social unrest by 'the majority'.  Main stream Partys merge and recruit 'volunteers' to help fight against 'social injustice'. Suddenly shop windows get smashed and anyone not 'woke' suddenly gets a kicking. Immigrants told to hold their heads up because they are the real victims.

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I think the planning here initially is more for the banks.  Essentially the question is "where would you stick you money if you can't put it in the overnight market?"

If you think about it, the Overnight is very short term, but is essentially free zero risk income, but clearly the money earned at such low rates is tiny. The expectation is that with negative rates the banks will either sit on it ir put it to work elsewhere. The only time you'd elect to put it overnight is if you felt all other investments would collapse- but then physical gold would be ideal.

 

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Can banks legally start charging account fees overnight without giving depositors notice? Just wondering how they will prevent bank runs if people start panicing about their 30k or so "life savings" having a small account fee of 0.25%.

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I agree with you.

I foresee some real trouble ahead as more and more people compete for less and less government handouts. I am a white heterosexual middle aged male which means I get to hear the REAL opinions of similar. Not so long ago whilst on site in a professional capacity, another guy (same as me) who was working as a client said the following completely unsolicited and unprovoked:- "Enoch was right wasnt he."

I was a bit taken aback to say the least.

 

See below a slight alteration of your text to describe the last 6 months of fun as perceived by many...

Lots of military uniforms and virtue signalling to cover any social unrest by 'the majority'.  Main stream Partys merge and recruit 'volunteers' to help fight against 'social injustice'. Suddenly shop windows get smashed and anyone not 'woke' suddenly gets a kicking. Immigrants told to hold their heads up because they are the real victims.

some here think Operation Himmler was 'fake news'

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I think the planning here initially is more for the banks.  Essentially the question is "where would you stick you money if you can't put it in the overnight market?"

If you think about it, the Overnight is very short term, but is essentially free zero risk income, but clearly the money earned at such low rates is tiny. The expectation is that with negative rates the banks will either sit on it ir put it to work elsewhere. The only time you'd elect to put it overnight is if you felt all other investments would collapse- but then physical gold would be ideal.

 

That and things like making sure systems don't go haywire in the event negative or zero numbers are used.

It hints that there is a likelyhood it will happen. TBH all banks should have been prepared for this years ago, but still we will probably find that there will be some systems that go down because of it.

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Can banks legally start charging account fees overnight without giving depositors notice? Just wondering how they will prevent bank runs if people start panicing about their 30k or so "life savings" having a small account fee of 0.25%.

No. But they can give notice.

I.e in 30 days we will start charging you £5 a month to keep your current account. However here is "free" travel insurance or breakdown cover etc. etc. exactly what happened in Switzerland and no bank run whatsoever.

 

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Can banks legally start charging account fees overnight without giving depositors notice? Just wondering how they will prevent bank runs if people start panicing about their 30k or so "life savings" having a small account fee of 0.25%.

They'll give notice and put up barriers to stop runs.

You can pay a monthly 'fee' and get free insurance chucked in for a year...

You can have 'free' accounts, but suddenly there is a fee for transfers, payments, DD changes, etc.

You can move your money subject to a 30 day cooling off period (for 'fraud checks'). Of course you can move faster...for a fee.

 

See how the game is played?

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It will be passed on, but delivered through new 'fees'; Expect the principle of 'free banking' to come under fire. There may be a headline grabbing -ve mortgage (we pay you to be a debt junkie), but expect that to be restricted to 'traditional'  photogenic couples in the Daily Fail.

Agreed. 

No bank is going to be able to pass on a negative interest rate, so that means that means that the spread between what they lend out at against what they pay depositors is getting compressed. This spread (net interest rate margin) is declining for all banks at the moment and is why British banks have lost 50% of their value in the last year (covid is a factor too). The proposal for negative interest rates will only exacerbate the problems faced by the banks.

If the banks cannot make the money back through lending, then it's clear to me that they are going to need to start charging fees on formerly "free" banking services like current accounts.

I am sure the fees will come, and the government will act in complete indignation that the evil profiteering banks are trying to levy fees on ordinary decent folk, completely oblivious to the fact that it's the ridiculous Bank of England policies that are the cause of it all.

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Agreed. 

No bank is going to be able to pass on a negative interest rate, so that means that means that the spread between what they lend out at against what they pay depositors is getting compressed. This spread (net interest rate margin) is declining for all banks at the moment and is why British banks have lost 50% of their value in the last year (covid is a factor too). The proposal for negative interest rates will only exacerbate the problems faced by the banks.

If the banks cannot make the money back through lending, then it's clear to me that they are going to need to start charging fees on formerly "free" banking services like current accounts.

I am sure the fees will come, and the government will act in complete indignation that the evil profiteering banks are trying to levy fees on ordinary decent folk, completely oblivious to the fact that it's the ridiculous Bank of England policies that are the cause of it all.

Dont be so sure. The masses will have monthly fees, the rich a %.

https://www.theguardian.com/business/2019/aug/06/raking-it-in-ubs-to-start-charging-super-rich-clients-for-cash-deposits

Mortgages, negative for special people... 0% for most.

https://www.theguardian.com/money/2019/aug/13/danish-bank-launches-worlds-first-negative-interest-rate-mortgage

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Agreed. 

No bank is going to be able to pass on a negative interest rate, so that means that means that the spread between what they lend out at against what they pay depositors is getting compressed. This spread (net interest rate margin) is declining for all banks at the moment and is why British banks have lost 50% of their value in the last year (covid is a factor too). The proposal for negative interest rates will only exacerbate the problems faced by the banks.

If the banks cannot make the money back through lending, then it's clear to me that they are going to need to start charging fees on formerly "free" banking services like current accounts.

I am sure the fees will come, and the government will act in complete indignation that the evil profiteering banks are trying to levy fees on ordinary decent folk, completely oblivious to the fact that it's the ridiculous Bank of England policies that are the cause of it all.

Mortgage rates are what, 3% with a near zero base rate, implying base rates are going to have to go down to around -3% in order for rates to be advertised as negative. Can't see this happening at any time in the near future.

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No. But they can give notice.

I.e in 30 days we will start charging you £5 a month to keep your current account. However here is "free" travel insurance or breakdown cover etc. etc. exactly what happened in Switzerland and no bank run whatsoever.

 

BoE will get rid of larger denomination bank notes too.

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  • 433 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



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