Savers with high balances may be particularly likely to be charged fees by their bank if the Bank of England base rate turns negative, according to one analyst.
And if rates do eventually turn negative, there could be an “explosion” of zero-interest savings accounts, it was claimed.
The Bank has held the rate at 0.1%, but told lenders to get ready for potential future negative interests rates. But it has stressed such a move was not imminent.
Those with higher balances would be most at risk, because a bank account provides security that is hard to replicate without financial costLaith Khalaf, AJ Bell
Laith Khalaf, financial analyst at AJ Bell, said: “Experience of negative rates in other countries suggests that even if rates turn negative, most banks wouldn’t charge high street customers to hold money in their accounts, mainly because you can always take cash out of the bank and stuff it in a mattress.
“Those with higher balances would be most at risk, because a bank account provides security that is hard to replicate without financial cost.”
Mr Khalaf said that a negative base rate “would likely lead to an explosion in the number of bank accounts paying zero interest, which currently house around £225 billion of savers’ cash.
“While savers might not explicitly pay interest to their bank, it’s possible banks would introduce fees instead.”
He continued: “Whether we get negative rates or not, the outlook for cash savers is a continuation of rates at rock bottom levels. With inflation expected to rise this year, that’s really going to bite into the buying power of cash held in the bank.”
(Banks) would undoubtedly reduce rates where they could, and some might cut them to 0%Sarah Coles, Hargreaves Lansdown
Sarah Coles, personal finance analyst, Hargreaves Lansdown, said: “Banks really don’t want to start charging us to save.
“They’d be worried we’d withdraw our savings and keep them under the mattress – leaving the bank short of liquidity.
“They would undoubtedly reduce rates where they could, and some might cut them to 0%. However, even if this happens – and that’s a big if – there will still be banks competing for market share, and offering positive rates to those who are prepared to shop around.”
Home owners hoping to get paid to borrow money could also be disappointed.
Looking at mortgages, Ms Coles said: “Most mortgages are fixed anyway, and variable mortgages usually have a floor they can’t drop beneath.
“New mortgages would get cheaper but in reality, we’d be unlikely to be paid to borrow money.
“In those countries where they have negative rates, some have fed through into a handful of mortgages, but because of the fees they come with, people aren’t really being paid to borrow.”