Banks asked to prepare for negative interest rates

Think it’s Denmark that has some mortgage offers where you are paid to take out the loan.

Anyway, the principle is to ensure money gets lent out. But one thing to consider for U.K. banks / building societies is that mortgage rates are likely to increase so that they retain margins.
 
Soutra said:
Well at least in theory, this is a great time to start or expand a business. Cheap loans, lots of good people in the labour market, business premises empty everywhere, people running into trouble importing from Europe, no point in saving money in deposit accounts.

The disappointing thing from my perspective is that to so many people in England, opening a business means opening a shop. Retail is on its knees and there's a limit to the number of coffee shops a town needs. Where are the IT entrepreneurs in England? Edinburgh is chock full of them.
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Soutra,
It is funny you say that, after a long career in banking and credit. I recently moved to Devon to set up a kitchen business. Ok it is retail but we are not reliant on the High Street. You wouldnt belive the stress trying to trade through the current situation. We are fortunate that the Covid risk is very low locally. I would love to find an entrepreneur to take over from me, they do seem thin on the ground at the moment.
 
Smog in Wilts said:
Soutra,
It is funny you say that, after a long career in banking and credit. I recently moved to Devon to set up a kitchen business. Ok it is retail but we are not reliant on the High Street. You wouldnt belive the stress trying to trade through the current situation. We are fortunate that the Covid risk is very low locally. I would love to find an entrepreneur to take over from me, they do seem thin on the ground at the moment.
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Well done. I wish you the best of luck. Kitchens are likely to be one of the areas where people spend their money. I hope you make it a great success.
 
In many ways negative interest rates will be good for borrowing. However for those not on the property ladder it means more misery I forsee. Property prices will only go one way - up as property remains a better alternative to soak up liquidity. People wont sell investment houses (whats the point) so renting society will only strengthen.
 
Soutra said:
Well at least in theory, this is a great time to start or expand a business. Cheap loans, lots of good people in the labour market, business premises empty everywhere, people running into trouble importing from Europe, no point in saving money in deposit accounts.

The disappointing thing from my perspective is that to so many people in England, opening a business means opening a shop. Retail is on its knees and there's a limit to the number of coffee shops a town needs. Where are the IT entrepreneurs in England? Edinburgh is chock full of them.
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A friend of mine has just moved his family and returned to his homeland of Romania.

He runs a successful IT company, if you work in IT in Romania you don't pay any taxes untill you pass the age of 25 he says.
 
Anton_Berg said:
I can remember when free banking started. Now it's end about to end.
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I don't think this will happen, not leat out in the open. Banks will and have, charged for premium accounts but give you benefits, free insurance, cash back etc. What they may do is start clawing back the benefits on paid accounts so they give less on those premium accounts.

Negative interest rates don't mean the bank passes those on to the customer during borrowing. Base rate tracker mortgages have clauses so they cannot go below, for example 1%. So banks still make a bit of cash on borrowing. This will encourage banks to lend, as they make no money, or in fact it costs them money to deposit with the BoE. This will encourage them to lend to make a small amount on the cash deposited. This is the purpose of negative interest rates. To make banks lend money.

We may go back to paid accounts, I don't think we will.
 
Soutra said:
Well at least in theory, this is a great time to start or expand a business. Cheap loans, lots of good people in the labour market, business premises empty everywhere, people running into trouble importing from Europe, no point in saving money in deposit accounts.

The disappointing thing from my perspective is that to so many people in England, opening a business means opening a shop. Retail is on its knees and there's a limit to the number of coffee shops a town needs. Where are the IT entrepreneurs in England? Edinburgh is chock full of them.
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There's a massive amount of risk too, there's possibly a mini domestic property bubble about to burst, along with the repercussions of covid which will take years to fully recover from (although I think a large % will recover quick), companies starting to struggle with brexit, which will get worse and worse before it gets better (if it gets better, very big if).

Losing 0.5% in a savings account for a few years or making 10% investing is a much lesser risk of going to zero, than someone starting a business at the toughest trading conditions the uk will see for the next 5-10 years. It's tough enough starting a business anyway, never mind in a bit of a crazy time. For most who cannot see gaps in the market, they would probably be better off riding it out and see what happens for the next few years, rather than jumping in the deep end.

I totally understand what you're saying mind, and some sectors will be fine and some will grow, but there are many more that are in for a really tough time, especially anything to do with import/ export. The import/ export problems will drive up costs of everything to the consumer also so anything relying on the public spending could be in for trouble. This could effect everything, as its all linked.

Business premises may be cheap compared to two years ago, but if you add 10 new businesses, 100 go bust and you have 100 extra businesses with their staff working from home (as it's now easily seen as viable), then demand for premises will only go down. Buying any sort of premises would be crazy in my opinion, but a short term rent would be good, with the possibility of getting a reduction year on year.

Setting up peoples home offices, IT and anything related to that might be something to go into. A lot of people think they're going to be going back to massive offices, and I just don't see that, certainly not to the same level. Businesses will now have realised they can have people working from home, and a lot of people will really prefer it.

I'm thinking more about scaling down, selling up, changing industry (or moving to a different area of my industry) than expanding. It even
seems to me like there's less risk in stocks, then trying to fight the UK economy for the next 10 years.
 
NYboro said:
Damned foreigners - send them all home. :cry:
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To be fair he'd been looking to do it for a while but was busy getting his business off of the ground here in the UK.
He's keeping the business registered in the UK but will be working out of Romania.
 
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