The Bank of England has today held interest rates at 0.1 percent – which it was reduced to following two successive cuts in March 2020 following the coronavirus outbreak. Despite the news, there have been suggestions that negative interest rates are still a possibility on the horizon.
Commenting on today’s unanimous decision, Adrian Lowcock, head of personal investing at investment platform Willis Owen, said: “The Bank of England’s interest rate announcement has not come as a surprise, remaining at an all-time low of 0.1 percent.
“The question is, could we soon see negative interest rates?
“The outlook for the UK and global economies remains uncertain.
“We cannot rule out the prospect of a second wave of COVID-19 infections, mass unemployment and further lockdown measures.”
So, should negative interest rates become a reality in the UK, what could it mean for the population’s personal finances?
“If negative interest rates become a reality this could mean savers may have to pay to keep their money with banks,” said Mr Lowcock.
“Although rates are low it is always worth looking around.
“Fixed-rate bonds and notice accounts may be a better option as they tend to offer a higher interest.
“People will need to think carefully about how to get the best returns from their savings.
“Investing in a diverse portfolio of savings and investments is a smarter move for growing your money over the long-term.”
Speculation about negative interest rates is something which has also been raised today by Kevin Brown, savings specialist at Scottish Friendly.
He commented: “On one hand, today’s announcement that the Bank of England base rate is being held at 0.1 percent isn’t much of a surprise.
“However, with economic uncertainty everywhere, speculation continues that interest rates could go into negative territory before the end of the year.
“That spectre looms large in the background and could serve as a tipping point for many cash savers to find ways to make their money work harder.
“Naturally many may consider investing as a better way to grow their money and reach their savings goals in the long-term.”
Despite the speculation, negative interest rates aren’t the only option for the Bank of England, as Azad Zangana, Senior European Economist and Strategist at Schroders has explained.
Mr Zangana said: “Although we do not expect to see negative interest rates in the UK, if this did actually happen, it could have a number of far-reaching consequences for consumers, businesses and banks as well as the economy.
“We actually doubt the BoE will cut interest rates below zero.
“Instead, further expansions in QE [quantitative easing] are possible, with the BoE continuing to indicate that interest rates will remain on hold for some time.
“In terms of what could happen next, to support the economy, the BoE could continue to buy more bonds.
“This can lower borrowing costs and encourage lending without moving the base rate into negative territory.”
Published at Thu, 06 Aug 2020 10:20:03 +0000