The Bank of England (BoE) maintained the UK’s base interest rate at its record low of 0.1% in December, but in light of January’s 2021 national lockdown, could rates go negative?
What could negative interest rates mean for you?
For people approaching retirement, it usually makes sense to have adopted a lower risk strategy by moving into lower-risk investments such as bonds. If interest rates go negative, the value of these bonds would decrease and for those closer to retirement, there would be less time to recover any losses incurred.
Savings rates are already low and if they turn negative, it may mean having to pay banks to keep our money safe. This could take the form of paying a fee for a bank account or being charged for banking services. In reality, this is unlikely for the average saver, it may only apply to those with high deposits.
We’ve kept the good news till last – we all need whatever boost we can get at the moment! While negative rates are unlikely to be passed along to mortgage holders (tracker and variable rate mortgages often contain mechanisms to prevent negative interest rates, for example) mortgages still look set to remain highly competitive for the foreseeable future – great news for buyers or remortgagers!
Whatever your financial situation, we have a team of Financial Specialists to advise you. If you are concerned about the potential impact of negative interest rates, get in touch, and our team will be able to help you assess all the options available to you.
The value of investments and any income from them can fall as well as rise and you may not get back the original amount invested.