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Could you soon be paying your bank to hold your savings?

With the Bank of England considering negative interest rates, we look at what this could mean for your savings.

Important notes

This article isn’t personal advice. If you’re not sure whether an investment is right for you please seek advice. If you choose to invest the value of your investment will rise and fall, so you could get back less than you put in.

This article is more than 6 months old

It was correct at the time of publishing. Our views and any references to tax, investment and pension rules may have changed since then.

In a U-turn of sentiment, Bank of England (BoE) Governor, Andrew Bailey has now said the BoE is considering negative interest rates with more urgency. This step, combined with other efforts will be in an attempt to help support the UK economy.

If the BoE do turn to the idea of negative interest rates, it would join the list of a number of other central banks from countries like Switzerland, Japan, Sweden and Denmark.

It’s already a tough environment for savers, sparked in part by the two BoE cuts in March. Most high street banks are, or shortly will be, paying just 0.01% on instant access accounts. So they can’t go much further without turning negative.

This article isn't personal advice, so you need to be comfortable with making your own decisions.

What could this mean for banks?

Any future cut would hit the banks’ net interest margin. This is the difference between the rate they offer savers and the rate they lend money out.

A decision to turn savings rates negative would be a monumental step, something the banks might not wish to take. But it would certainly get rid of any need for the larger banks to offer attractive rates to savers.

If they don’t want to drop rates further, they face the prospect of having to take a hit to profits or look at other methods to plug the gap – maybe even charging people to have a savings account.

But this might not be the case for all banks. Smaller challenger banks, for example, are likely to still need to offer better rates to bring money in and try to compete with the bigger more well-known banks.

How could this impact your savings?

Looking further afield in the wider savings market, we’ve seen average rates drop since the start of the year. The average instant access account pays just 0.21%, down from 0.39%. A 1 year fix is down to 0.60%.

If the BoE does decide to go negative, we expect to see further pressure on these rates, meaning they could drop even lower. Now could be the time to take control of your savings to get a better return.

Make sure your cash is working harder

In a low interest rate environment, you might not think moving your savings is worth the effort. But lots of us have our savings sat in high street accounts, which pay some of the lowest rates. You could be surprised by the difference a new rate could make to your savings pot.

Try our savings calculator

Opening savings accounts with a new provider can be a lot of hassle – going through application forms and having to prove who you are every time. You’ll probably need to set up and remember new security information too.

Active Savings could help.

With one online account you can pick and mix easy access and fixed term savings products from a range of banks and building societies. Once you’re set up, there’s no more paperwork or forms when you want to open new products. And it’s easy to manage, allowing you to see all your savings in one place, alongside any other Hargreaves Lansdown investments you might have.

There are great rates to choose from, up to 0.55% (AER/Gross*) on easy access and 1.10% (AER/Gross) on a 1 year fix. There’s also a wide selection of products, including fixed terms up to three years. So you should be able to find a mix of products that’s right for you.

Get a £25 bonus

If you open an Active Savings account by 17 June, add £5,000 or more by debit card and provide us with an instruction as to where you would like to save within 60 days, you could qualify for a £25 bonus. All we ask is you then keep your Active Savings balance above £5,000 for 6 months. Full terms are in the link below.

See full terms

Find out more

Remember inflation reduces the future spending power of money. Once in a fixed term product you cannot normally access the money until maturity.

Products available through Active Savings can be added or withdrawn at any time. Minimum deposit requirements apply to individual products. Instant access products allow immediate cash withdrawals. Active Savings offer easy access products where withdrawals usually take one working day.

*AER (Annual Equivalent Rate) shows what the interest rate would be if interest was paid and compounded once each year. It helps you compare the interest rates on different savings products.

Gross means the interest rate without any tax deducted. Interest is paid gross. You’re responsible for paying any tax due on interest that exceeds your Personal Savings Allowance to HM Revenue & Customs. Tax treatment can change.

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    Important notes

    This article isn’t personal advice. If you’re not sure whether an investment is right for you please seek advice. If you choose to invest the value of your investment will rise and fall, so you could get back less than you put in.

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