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Two-thirds of investors 'concerned' about prospect of negative rates

Lucy Harley-McKeown
·2-min read
While a majority of investors surveyed fear a drop below zero, more than half (55%) said they are unsure of how negative rates would impact their portfolio, the research found. Photo: Luke MacGregor/Reuters
While a majority of investors surveyed fear a drop below zero, more than half (55%) said they are unsure of how negative rates would impact their portfolio, the research found. Photo: Luke MacGregor/Reuters

Almost two-thirds (64%) of investors are “concerned” by the prospect of negative interest rates, according to a survey published on Monday.

In anticipation of the Bank of England’s (BOE) update on Thursday (4 February), new analysis by forex and CFD broker HYCM surveyed more than 900 UK-based investors with investments in excess of £10,000, on attitudes to a potential drop below zero.

While a majority fear a drop below zero, more than half (55%) said they are unsure of how negative rates would impact their portfolio, the research found.

In September, speculation had been mounting that the BOE could take interest rates into negative territory for the first time in history in 2021 if the UK economy weakens further.

Governor Andrew Bailey had refused to rule out taking UK interest rates into negative territory back then.

Now, while negative interest rates are not likely to be announced, recent comments from members of the bank’s monetary policy committee (MPC) suggest negative interest rates could be introduced in 2021 to help boost economic growth.

In January, Silvana Tenreyro — an external member of the MPC talked up the potential benefits of negative rates.

WATCH: What are negative interest rates?

Giles Coghlan, chief currency analyst at HYCM, said: “More clarity is needed as to whether the Bank of England will need to use negative interest rates, especially now there has been a positive Brexit deal for the UK at the start of 2021.

“For now, we know that governor Andrew Bailey wants negative interest rates to remain part of the Bank’s ‘tool kit’. Whether they will be deployed is another matter,” Coghlan continued.

READ MORE: Interest rates in focus ahead of key week for central banks

Coghlan notes that investors should not be nervous about the move, as retail investors should not expect to pay interest on the cash they are holding in bank savings accounts as this has not happened in Switzerland which currently have negative interest rates of -0.75%.

“I’m more interested to see how the pound and FTSE could react to such an announcement and whether this might lead to new investment opportunities. Certainly, a walking back from the use of negative interest rates creates opportunities for short term GBP strength at the very least,” he concluded.

When it comes to investor confidence, 50% of investors are optimistic that the financial markets will fully recover this year from the disruption caused by COVID-19, the survey found.

Over half (54%) said they are making short-term financial decisions due to market uncertainty caused by the pandemic.