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Martin Lewis, 48, recently appeared on his Money Show and addressed the latest news immediately. A person called Sue asked Martin for his advice given the fact that the Bank of England has asked retail banks if they’re ready for negative rates which, understandably, may make regular savers nervous.
Before detailing the best options for savers who may be affected by these changes, Martin clarified exactly what’s happened at the Bank of England: “This week the Bank of England wrote to the high streets bank to say, if in the unlikely event that we were to cut UK interest rates so they were negative, are you technically prepared for that to happen?
“Now, even if that were to happen that doesn’t mean savings rates are also going negative”.
Martin went on to explain that as a rule, savings rates tend to be much higher than the Bank of England base rate but he acknowledged it remains a possibility that savings rates may be reduced by income negative rates.
However, in answering Sue’s question on what savers can do if negative rates come into play, he responded with: “Very little”.
He went on to highlight savers may be able to lock in fixed savings rates if they’re worried.
These will lock in cash and make it inaccessible but the rate on the account should remain the same, and Martin went on to highlight where the best offers are at the moment for these products: “DF Capital is 1.18 percent for one year which is quite a lot higher than the rest of the market so I don’t think it will last very long.
“And for two years, Aldermore 1.15 percent, for three years, UBL is 1.4 percent but don’t wait until they drop.
“If you think that’s plausible and it worries you lock in now, because once rates drop you won’t be able to lock in as high is the likelihood”.
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Recently Sam Woods, the deputy governor of the Bank of England wrote to UK banks.
As his correspondence detailed: “For a negative bank rate to be effective as a policy tool, the financial sector – as the key transmission mechanism of monetary policy – would need to be operationally ready to implement it in a way that does not adversely affect the safety and soundness of firms.
“As part of this work, we are requesting specific information about your firm’s current readiness to deal with a zero bank rate, a negative bank rate, or a tiered system of reserves remuneration – and the steps that you would need to take to prepare for the implementation of these.
“We are also seeking to understand whether there may be potential for short-term solutions or workarounds, as well as permanent systems changes.”
It was stressed the letter was not an indication the central bank would be implementing negative rates but the central bank has admitted in recent months that the option is “in the toolbox”.
The next decision on changing this will occur on November 5.
Additionally, Martin also covered HM Treasury’s recently announcement of allowing consumers to get cashback from retailers without needing to make a purchase.
This is being introduced to protect cash use which is crucial for the elderly and vulnerable.
John Glen, the Economic Secretary to the Treasury, welcomed the proposals with the following comments: “We know that cash is still really important for consumers and businesses – that’s why we promised to legislate to protect access for everyone who needs it.
“We want to harness the same creative thinking that has driven innovation in digital payments to maintain the UK’s cash system and make sure people can easily access cash in their local area.”
Full details on this can be found on the government’s website.
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