Could your savings rate go negative?

This is Money Podcast

This is Money

Business News, Business, Investing, News

4.1 • 650 Ratings

🗓️ 23 May 2020

⏱️ 49 minutes

🔗️ Recording | iTunes | RSS

🧾️ Download transcript

Summary

The threat of negative interest rates is looming large for savers.

This week, a government bond auction saw UK gilts sold at a negative rate for the first time, while Bank of England boss Andrew Bailey refused to rule out the base rate flipping below zero.

But could you end up with a negative rate on your savings account?

On this week’s podcast, Simon Lambert, Lee Boyce and Georgie Frost look at the weird world of negative rates – an upside down where investors effectively pay to lend the government money, banks are charged interest for depositing funds with the Bank of England, and you’d end up being stung rather than rewarded for saving.

Not that there’s much reward for saving in many places right now: a This is Money investigation this week revealed that 235 savings accounts now pay 0.01 per cent interest.

That is 10p per year on £1,000 saved and some may prefer not to be insulted in that way and have their bank or building society join the six accounts where absolutely zero is paid.

The best accounts pay just over 1 per cent and while that’s not much, at least savers are getting a real return on their money, with inflation at 0.8 per cent.

But another warning has been sounded and it’s that the end game of through-the-looking-glass monetary policy could be inflation soaring. The team look at what the argument is and whether it stacks up.

The base rate is at 0.1 per cent (and could go negative) and bond yields are on the floor, because of the economic destruction of the coronavirus crisis.

The furlough scheme is one of Chancellor Rishi Sunak’s flagship efforts to combat this, but another This is Money investigation this week revealed companies that have taken advantage of the taxpayer’s offer to pay 80 per cent of their staff’s wages are now threatening to make them redundant anyway.

And finally, on a lighter note, if you’re feeling brave then you might decide now is the time to buy a home, while house prices and confidence have taken a knock, but is the estate agent allowed to tell you what others have offered?

Transcript

Click on a timestamp to play from that location

0:00.0	Welcome to This Is Money, and I'm Georgie Frost.
0:02.3	And alongside editor Simon Lambert.
0:04.0	Me today is Assistant Editor Lee Boyce.
0:06.7	And this week, we look at the Savers' dilemma,
0:09.7	with hundreds of accounts paying, quite frankly, an offensive 0.01%,
0:14.6	some nothing at all.
0:16.7	Where should you be putting your money?
0:18.9	This week's drop in inflation is a smidgen of good news for savers, but will it last, or will the coronavirus crash lead ultimately to a huge spike in inflation?
0:27.6	Simon has been pondering that one.
0:30.6	Also today, investors have been paying the Bank of England money, but why?
0:34.6	Furloughing? Less an opportunity for some businesses to get themselves back up and running
0:38.8	quickly and more a stay of execution for workers it seems plus can an estate agent tell you what
0:45.6	someone else has offered for your dream home all that and plenty more don't forget you stay out
0:49.6	to date with all the latest breaking money use just go to this ismoney.co.com.uk or download the app but first.
0:56.3	Now, I realised things were bad when I got a message from my Marcus account, saying that once
1:02.8	again, my blockbusting rate was dropping to 1.05%. Now, that is bad, but the penny drop moment was when I'm looking around for alternatives
1:13.2	and seeing that it is still cut included one of the best easy access accounts on the market.
1:19.4	And as it turns out, I don't even know that I'm born because this is money, I've been looking
1:23.7	into this and found hundreds of banks offering as lower rates as 0.01% and some, none at all.
1:32.7	Although Simon might quite like that, as long as it came with a note saying,
1:36.0	we're not going to pay you an offensive amount, we're just not going to bother at all.
1:39.3	Now, with the Bank of England's base rate threatening to dip into the negative,
	...

Please login to see the full transcript.

Previous episode | Next episode

Disclaimer: The podcast and artwork embedded on this page are from This is Money, and are the property of its owner and not affiliated with or endorsed by Tapesearch.

Generated transcripts are the property of This is Money and are distributed freely under the Fair Use doctrine. Transcripts generated by Tapesearch are not guaranteed to be accurate.