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Negative Bank Interest Rates?

February 2013

The Bank of England deputy governor said negative interest rates should be considered.

Bournecoast, Bournemouth’s leading Buy-to-Let (“B2L”) specialist said the BBC have this week reported that Paul Tucker believed negative interest rates should be considered in an attempt to boost the UK’s flailing economy.

Mr Tucker’s suggestion is for the Central Bank to cut charges to High Street banks to hold their money therefore encouraging them to lend out more of their funds.

Speaking to MPs on the Treasury Committee, Mr Tucker said: "This would be an extraordinary thing to do and it needs to be thought through carefully."

This was one of a number of ideas put before the Treasury for consideration.

Any discussion of negative rates would have to take into account the likely detrimental impact on savers, who already have seen their income from savings fall since the onset of the current financial crisis.

Any discussion of negative rates would have to take into account the likely detrimental impact on savers, who already have seen their income from savings fall since the onset of the current financial crisis.

Simon Tebbutt, Business Development Manager for Bournecoast said: “This is great news for the property investor. At the end of last year I spoke about how people were erring towards investing in property instead of putting more money into savings and their pensions due to the more favourable returns possible. With property prices still very depressed, it makes sense that people buy properties to rent out. We are currently seeing the highest ever demand for rental properties over purchasing, as first time buyers are simply unable to secure funding to get into the property market.

With a B2L property the investor not only sees their capital asset increase in value over time but they also receive an income too.”

It all sounds a most bizarre idea and indeed Mr Tucker himself acknowledged it would be an "extraordinary" move but it is clearly in the Bank's thinking even if not adopted at this stage.

The Danish Central Bank has already gone down this route. The theory behind it, is that commercial banks are depositing too much cash in the vaults of the Bank of England.

There would not be negative interest on High Street deposits but banks would almost certainly react by cutting savings rates and raising current account charges.

For more information how your money can work for you, contact the friendly team at Bournecoast on 01202 437888 or www.bournecoast.co.uk to discuss options of B2L.

Issued by:
Alex Eaton
Marketing
Bournecoast
alexeaton@bournecoast.co.uk
01202 437888

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26 Southbourne Grove
Bournemouth
Dorset
BH6 3RA
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