View more on these topics

BSA warns negative interest rates will hurt mutuals

Paul Tucker MPC 480

The Building Societies Association has warned negative interest rates would hurt mutuals by cutting their main funding line of retail deposits, but brokers say it could bring a much-needed boost to the mortgage market.

Bank of England deputy governor Paul Tucker told the Treasury select committee this week the monetary policy committee has discussed the idea of negative interest rates.

He said: “I hope we will continue to think about whether there are constraints to setting negative interest rates. This is an idea I have raised. This would be an extraordinary thing to do and it needs to be thought through very carefully.”

Building Societies Association head of mortgage policy Paul Broadhead says the move would “decimate” returns to savers, which would have a knock-on effect on the funding available to lend.

He says: “While we have the Funding for Lending scheme, the vast majority of mortgages in our sector are funded through retail deposits. Any fall in that, based on a fall in interest rates, would not be helpful. We would strongly caution against this as an idea.”

But John Charcol senior technical director Ray Boulger says the move could significantly boost the mortgage market.

He says: “Negative interest rates will increase the pressure to lend and the mortgage market would be a major beneficiary of any such action. This increases the likelihood of genuine cuts in two-year fixed rates as opposed to lower rates financed by higher fees.”


News and expert analysis straight to your inbox

Sign up


    Leave a comment


    Why register with Money Marketing ?

    Providing trusted insight for professional advisers.  Since 1985 Money Marketing has helped promote and analyse the financial adviser community in the UK and continues to be the trusted industry brand for independent insight and advice.

    News & analysis delivered directly to your inbox
    Register today to receive our range of news alerts including daily and weekly briefings

    Money Marketing Events
    Be the first to hear about our industry leading conferences, awards, roundtables and more.

    Research and insight
    Take part in and see the results of Money Marketing's flagship investigations into industry trends.

    Have your say
    Only registered users can post comments. As the voice of the adviser community, our content generates robust debate. Sign up today and make your voice heard.

    Register now

    Having problems?

    Contact us on +44 (0)20 7292 3712

    Lines are open Monday to Friday 9:00am -5.00pm