Surely I am not the only landlord worried about new EPC requirements?
9:44 AM, 17th February 2021About 3 weeks ago 128
BofE writes to CEOs to gauge readiness for zero or negative interest rates
Make Text Bigger There is no indication it is likely, or that the Bank of England will reduce the Base Rate to zero or a negative figure. However, a letter has been sent by Sam Woods on behalf of the Bank of England to selected firms’ CEOs asking about their operational readiness should interest rates move in that direction.
This is to prepare the groundwork should economic factors make a decision to decreases the interest rate advantageous. The Bank of England has seemed keen so far to avoid a negative rate as this brings its own complications and costs with little evidence of effectiveness when implemented by the Central European Bank and long term negative interest rates in Japan.
A negative interest rate would encourage a Bank, on the one hand, to lend rather than hold on to reserves, but equally would make it more difficult to attract funds adversely affecting liquidity reserve ratios that must be kept above a certain point under stress testing rules.
“Dear CEO
Operational readiness for a zero or negative Bank Rate
Since the financial crisis in 2008, interest rates in the UK and elsewhere have reached historically low levels, and some central banks have implemented negative interest rates as a monetary policy tool. In August, the Bank of England’monetary Policy Committee (MPC)noted that it would continue to assess the appropriateness of a negative official Bank Rate alongside all of its other tools.
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 highlighted in the September minutes of the MPC,1the Bank of England (the Bank) and the Prudential Regulation Authority(PRA)are commencing structured engagement on the operational considerations of a negative policy rate. For these purposes, we also include being operationally ready to deal with a zero Bank Rate. This structured engagement is not indicative that the MPC will employ a zero or negative policy rate. The appropriate level of Bank Rate remains a decision for the MPC, which sets monetary policy to meet the 2% inflation target in a way that helps to sustain growth and employment. This engagement is not asking firms to begin taking steps to ensure they are operationally ready to implement a negative Bank Rate.
We recognise that a negative policy rate could have wider implications for your firms business and your customers. The Bank and PRA will consider the wider business implications, including on financial stability, safety and soundness of authorised firms and pass-through to the wider economy. This letter, however, is seeking information to understand firms’ operational readiness and challenges with potential implementation, particularly in terms of technology capabilities.
Responding to this letter and the structured survey questions attached will help us and firms to identify whether there are any technical operational challenges associated with the implementation of a zero or negative Bank Rate, and to consider how best to prepare and prevent any unintended operational disruption that could be associated with a change should the MPC decide it was appropriate.
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.
It is important for the Bank, PRA, and firms to understand the implications of these potential approaches to implementing a zero or negative Bank Rate, since the MPC may see fit to choose various options based on the situation at the time. We are also seeking to understand whether there may be potential for short-term solutions or workarounds, as well as permanent systems changes.
The responses to this letter will be shared across the Bank and PRA‘s different functions to assist in forming a structured view on readiness and contingency plans. This will inform the MPC about the operational aspects of a negative policy rate, and the Bank and PRA’s understanding of the implications for firms and the UK financial system, in line with our objectives.
While completing the data template is voluntary, your response will help to ensure that the Bank and PRA have an accurate and comprehensive understanding of any potential issues and risks associated with the operational implementation of a zero or negative Bank Rate. Reflecting the importance that the PRA places on this request and our desire for your response to be considered at the most senior levels within your firm, I would welcome responses from CEOs.”
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Mick Roberts
12:56 PM, 12th October 2020
About 5 months ago
I understand a bit about savings & people would have to pay the bank to keep their money.
But who knows about Trackers? I know some banks used to have clauses minimum floor figure 3% interest rate. But those with no clause in at 0.5% over BOE tracker for example, if BOE drops to 0.25% below, does anyone know if it will be as clear as the Lending rate will then be 0.25%?
Seething Landlord
13:25 PM, 12th October 2020
About 5 months ago
Reply to the comment left by Mick Roberts at 12/10/2020 - 12:56
I assume it will depend on the precise wording of the mortgage t&cs. It could become even more interesting if BOE rate drops to -1%; would they then have to pay you 0.5%?
TrevL
13:26 PM, 12th October 2020
About 5 months ago
Reply to the comment left by Mick Roberts at 12/10/2020 - 12:56
Who knows, but I remember a year or two ago Danish borrowers being paid for their mortgages....which would be nice if that happened here.....for those with mortgages at least.
It's scary territory, as my savings will be coming out of the bank if I have pay to keep them there.....and I hate to think what happens if lots of people do that....cue Northern Rock part two.
Neil Patterson
13:47 PM, 12th October 2020
About 5 months ago
Reply to the comment left by Mick Roberts at 12/10/2020 - 12:56
Hi Mick,
Yes it would depend on individual terms and conditions and interest rate floors etc.
Best case scenario a lender may potentially reduce the capital balance. but we would be in uncharted shark-infested waters!
Question Everything
14:12 PM, 12th October 2020
About 5 months ago
Reply to the comment left by TrevL at 12/10/2020 - 13:26
You can currently get 10%PA on your savings at Nexo.io. The problem is that no-one really understands the new economy of blockchain. You can be sure the banks don't want to tell you.
You can even buy a blockchain 'certificated" gold and get interest paid on that!
Thing is, the -ve rates are coming. They will come because any "letter" being written or proposal or whatever scheme that reduces the publics wealth and transfers it to .gov and the big corps/banks does happen. Take this "letter" as a warning to get yourselves prepared.
This is how they communicate their intentions to the boys club while the people just look at it as small talk. It is effectively telling them they need to get their houses in order. Everything is done in your face so you don't suspect it to be damaging to you. In fact most of the time they spin it to make it look good for you.
You won't be able to pull your money out when it happens, because something else will have prevented that before hand. Likely some "emergency measure", like the lock-downs.
Just remember, the balance in your bank accounts is not legally yours. You are just the beneficial owner. That means they can do what they like with it.
When the run on the banks happened in Cyprus, Bitcoin spiked up. When you hold Bitcoin, it is purely yours and no-one else's. Microstrategy bought $450mil of it a couple of weeks ago. Jack Dorsey the Twitter and Paypal founder just bought $50mil of it last week.
Don't leave it too late.
Mick Roberts
14:59 PM, 12th October 2020
About 5 months ago
Reply to the comment left by Seething Landlord at 12/10/2020 - 13:25
Ha ha yes, now that would be Brucie Bonus time. I suppose Licensing would have some clause in there, that if banks start paying us, we have to give it the Council so they can waste more money.
Mick Roberts
15:02 PM, 12th October 2020
About 5 months ago
Reply to the comment left by TrevL at 12/10/2020 - 13:26
Wow, would be good.
Yes people with savings would have to adapt, problem is, lot of 'em don't know how to.
A note I send to some mates sometimes:
Too risky, over cautious. In the first 20 seconds of this video.
This 11 min video could change your life.
https://youtu.be/VITr1gIvElY
If u looking for safety, go huddle in a corner. Our life is affected by the way we think things are, not the way they are. Poor thinking habits keep people poor.
Some people will never have much. They are too cautious.
They keep saying What if this happens?
If u think trying is risky, wait till they hand u the bill for not trying.
Mick Roberts
15:03 PM, 12th October 2020
About 5 months ago
Reply to the comment left by Neil Patterson at 12/10/2020 - 13:47
Reducing the Capital Balance, oh if we could write a film about this & play it me before bed, dreams would be even better.
Ed Regent
16:22 PM, 12th October 2020
About 5 months ago
Reply to the comment left by Question Everything at 12/10/2020 - 14:12
Good to diversify no doubt Question Everything so Bitcoin is a decent bet, as is gold and silver. I've been stocking up over the past couple of years, alongside physical precious metals ETFs and miners. Think all of these will do well as the proverbial hits the fan over the coming months and probably years!
DALE ROBERTS
16:46 PM, 12th October 2020
About 5 months ago
I love the freedom of the stock market especially tech stocks on the USA exchange. I make more money in one evening than I make in a whole year of renting at GBP1800 a month (the costs of dealing with entitled tenants impacts so negatively on any gains). The rental has hardly increased in the 10 years I bought off plan. A paltry GBP300 extra to date. This would barely cover the mortgage had I not provided a 40% deposit. I can sell or buy my shares when I want to and am not subject to any pernicious regulations. My shares are my own assets without interference. I will never buy property again and have been divesting myself of my property portfolio intensely over the past 5 years and reinvesting the money in shares. I have one more UK unit to rid myself of and it has become a millstone. Empty and unwanted and languishing among the hundreds of other superfluous stock. Odd in a country that bemoans the lack of housing and insists there is a shortage in order to legislate landlords into providing same almost for free.