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During the interest rate meeting in November, Norges Bank allowed the key interest rate to remain at its historically sub-zero percent, and it will likely remain there for the next two years.
The consequences of the record key interest rate have been very low mortgage rates, much to the delight of loan customers, but at the same time deposit rates have also been very low.
You just get little in exchange for money left in your savings account these days.
The interest rate scenario can become reality
Zero interest can give a negative savings interest rate
Dinside has previously written about negative interest rates, which is not as utopian an interest rate scenario as it was a year ago. Several countries in Europe have interest rates below zero, that is, the following:
– Negative interest rates mean you get money back if you have a loan and you have to pay money back if you have money in your account, explains consumer economist Cecilie Tvetenstrand at Danske Bank to Dinside.
With this in mind, it’s a bit disturbing when Master of Business Administration Hallgeir Kvadsheim writes this in Pengeverkstedet, not on the same day the central bank sets the November interest rate:
If key interest rates remain at zero for several years, Norwegian banks may also have to pay from deposit clients, probably first from corporate clients, then from private clients with slightly higher deposits. But no one wants to be the first bank out, according to Kvadsheim.
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Happens in Denmark
The Master of Economics points across the North Sea, to Denmark, where banks have been operating at negative savings rates for several months. This is because the banks themselves have to pay money to place them in the central bank.
Politiken recently wrote that the country’s largest bank, Danske Bank, is lowering the negative interest rate cap to 250,000 Danish crowns (previously the cap was 1.5 million) starting in the New Year. If you want to invest more in a savings account, you must pay 0.6 percent interest – to the bank!
Record Low Loan Rate: Do This With Your Savings Now
– Cash is the ransom
But what about us? Are negative savings rates the next step for Norwegian banks too?
Information manager Tom Staavi from Finans Norge believes this is highly unlikely, at least for individuals:
– The reason for this is that individuals have an alternative to bank deposits, cash. For cash, the interest rate is zero, always, Staavi tells Dinside.
– I can hardly imagine negative interest rates on bank deposits for individuals, even if Norges Bank kept its interest rate at zero or set a negative interest rate from the central bank, it continues.
And, another reason why Staavi sees it as highly unlikely with negative interest rates at Norwegian banks, is that even though physical cash is becoming a smaller and smaller part of the money supply in Norway, Norges Bank is now considering a digital version of cash, the so-called “central bank digital money.”
When other countries set negative interest rates, this is because companies and individuals value other properties of a bank account in addition to returns, for example, that a large company must spend a lot of time and additional resources if all the management of the money was made manually with cash rather than electronically, according to Staavi. .
Therefore, this is one of the reasons why banks in some of the countries with negative interest rates have set a negative deposit rate for companies.
That is why you do not get the “gold rate”
Pay off a savings account or have money in the mattress?
Whether and to what extent Norwegian consumers can experience negative deposit rates is a question of supply and demand for banking services, according to Elisabeth Realfsen at Finansportalen.
– But even though we are in a period of low key interest rates, there is no automaticity between Norges Bank’s key interest rate and the banks’ prices to customers, Realfsen tells Dinside.
He also believes that it is conceivable that consumers benefit so much from bank payment services that we would rather pay something to have the money in the bank than have cash on the mattress and pay the bills manually.
Client payments can be made just as easily through fees, and not necessarily through banks that calculate a negative percentage interest rate on deposit accounts, according to Realfsen.
– Negative savings rates, such as low borrowing rates, point separately in the direction of increased consumption and investments, for example in housing, stocks and funds, which is also the intention, says university professor Dag Jørgen Hveem in BI to Dinside.
– However, interest rates below zero can have significant consequences if many choose to withdraw money, which is not desirable. For banks, there will probably be a long way to go with negative nominal interest rates, while the effective interest rate may be negatively generated account fees; this is, on the other hand, another “psychological” threshold, he adds.
