Could Negative Interest Rates Mean Money Back on your Mortgage?
By Eitan Fox | Created on 28th October 2020
Last year, Danish bank Jyske introduced a ten-year fixed-rate mortgage with a rate of -0.5%. However, the mortgage attracted fees which outweighed the negative interest – meaning borrowers still had to pay a small amount for their loan.
Could negative interest rates mean money back on your mortgage?
With the Bank of England base rate remaining at the 0.1% record low, introduced at the start of the coronavirus pandemic, there’s been a lot of talk in the media about what will happen if interest rates fall to zero, or even become negative.
Negative interest rates have been seen in other countries, and could be a reality in the UK, if it goes into a full, second lockdown. But what does that mean for savers and borrowers – will you be charged for holding money in a bank account or even paid for taking out a mortgage?
Probably not according to MoneySavingExpert founder Martin Lewis: “For those with mortgages and other debts, I wouldn’t expect to see you paid a negative interest rate. For some who are on very low trackers, … I think it’s more likely that we’d drop to somewhere around 0%. So, you wouldn’t have any cost for borrowing money on your mortgage, which would help some.”
Last year, Danish bank Jyske introduced a ten-year fixed-rate mortgage with a rate of -0.5%. However, the mortgage attracted fees which outweighed the negative interest – meaning borrowers still had to pay a small amount for their loan.
According to most commentators, it seems unlikely that UK banks would introduce a similar offer. This is because there’s already a disparity between the bank base rate at 0.1% and most mortgage deals, which start at around 1.2% – meaning the Bank of England rate would need to fall to around -1.1% for mortgage rates to reach zero.
In addition, demand for mortgages is currently high, following the Chancellor’s stamp duty holiday, pushing rates up rather than down.
In any case, most UK borrowers have a fixed rate mortgage, with even tracker deals usually having a built in ‘collar’ below which the rate cannot fall.
For example, Nationwide Building Society has a two-year tracker mortgage with a rate of 1.34% above base rate. Nationwide states that all trackers have a base rate floor of 0%, meaning that even if the base rate goes into negative territory, the loan has a minimum rate of 1.34%.
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Eitan Fox
I started at Plaza Estates in 1986. Eleven years were spent successfully running the Marble Arch office. Subsequently, I was asked to take on the exciting challenge of running the Sales Department in our Knightsbridge office. I have built an experienced team with the ethos that local knowledge, hard work and professional service will always provide success to our clients. With ever changing technology of which Plaza Estates are at the cutting edge of, I have often been asked, with over 30 years in the business, how I retain my enthusiasm? I am delighted to say many of our multi million pound clients are genuinely my friends and I have a great passion for people. My staff and I never forget that this challenging industry ultimately is a 'Peoples Business'. Therefore I would welcome the opportunity to help you with your property needs and hope you will allow our fully equipped and motivated team to provide you with their professional assistance.
If you want 5-star reviews and want to remove negative reviews from Google, contact me via my profile; my contact details are listed there.
SM
Dear Eitan
In this whole sorry saga, with headbutting, unproactive lawyers, and a comatose estate agent etc etc, you have been a beacon of light throughout. Efficient, professional and responsive. This would never have got done without you.
Thank you.
All the best.
Maurice Shasha
We have been using Plaza Estates for many years for all our property requirements (sales, letting and management) and are delighted with the results and service they constantly deliver and provide!
KS
I generally dealt with the Marble Arch branch most of the time, but I can also say that the Knightsbridge office was also exceptionally helpful and professional on the occasions I did deal with them. Plaza Estates in general are excellent.
YZ
Have interacted with Plaza Estates across a couple of sites and always been impressed. Maurice must be the hardest working, most dedicated, helpful and knowledgeable account manager for any company anywhere! A real asset to the team!
LI
I have been a client of Plaza Estates for over 30 years and received excellent service. Both Rodney on the rental side and Fiona in the property management area have been have been attentive and helpful and always willing to go the extra mile on the few occasions when there were problems.
SA
Hope both of you are doing well. I wanted to thank you for always being there for us and for addressing our concerns promptly; safe to say you have been the best agents I have had the pleasure of interacting with.
KR
We have owned our Flat since 2008, which we purchased through Plaza. Our relationship with Plaza goes back to 1982 when we purchased a nearby flat and Plaza have handled all our lettings since then. I would have no hesitation in recommending Plaza - they will find you a good tenant and ensure your ...
MS
Thank you again for all your advice and calm attitude and charm. Nobody could try harder than you, and for which, we really thank you and appreciate it all, not just now, but over the years.
Thanks again for everything!
