If you’ve missed the new this morning, NS&I have slashed the interest rates across it’s products. The government-backed body has announced changes including reductions on returns for savers and the decreased chance of winning on the Premium Bonds. Could this move, driven by the pandemic and staring a second wave in the face, be a foreshadowing of a move to negative interest rates?
A Devastating Blow
Described as a devastating blow for savers, it really is. There isn’t really anywhere right now that you can put your savings and make any decent money on. With some interest rates on accounts being 0.01%, it’s kind of pointless. If you have £10,000 in an account like that it would make £1 in a year. ONE POUND. Gone are the days of 3% or even 1.5% which would give you £200 or £150 respectively in our example.
Negative Interest Rates On The Way?
Negative interest rates would be when you had to pay the bank to hold your savings. Sounds bonkers doesn’t it? Whilst your savings would be protected up to £85k under the Financial Services Compensation Scheme (FSCS), meaning its better than sticking it under your mattress or behind your toilet cistern, it’s not exactly appealing. There are companies who charge you for a current account but with that you tend to get benefits like insurance however you wouldn’t get any actual benefits for negative interest rates. Your savings would go down monthly on month, year on year.
There could be one group who slightly benefit by negative interest rates. Those with variable rate mortgages linked to the base rate would see their bank become obliged to pay them interest. How the tables can indeed turn!
Switch Your Bank
The reality right now is that there are not many ways for your savings to make money. One of the best ways to make a chunk of money is to shift your current account. The switch incentives vanished for a few months but they are slowly coming back. Right now you could make £125 just from moving to another bank. That could be the by far the most money that your money, or money product in this case, makes this year!
Whilst saving rates are crashing and negative interest rates could be on the way, we need to do what we can to earn our money. Slash your bills by changing suppliers or start a side hustle. Cancel your unused subscriptions to save even more! I’ll be over here duck taping my cash behind the toilet.
