Charges loom for in-credit banking

Negative interest rates could mean in-credit banking customers are soon paying for the privilege of an account

The possibility of some customers being charged for depositing money has been raised, after a letter was sent to 1.3 million customers across NatWest and Royal Bank of Scotland (RBS) business and commercial banking.

:: What has happened?

Customers across NatWest and RBS commercial banking have been told about changes to their terms and conditions. The banking group has warned it might charge customers in the event of negative interest rates.

:: Will RBS/NatWest's personal banking customers be affected?

The banking brands say there are no current plans to pass negative rates through to personal customers - or to business customers for that matter.

They have said they "will do our utmost to protect our customers from any impacts".

It is understood they would get the regulator involved before making a decision where the change could be viewed as fundamentally altering the nature of the contract that the customer originally entered into.

:: What about other providers?

As would be expected, banks are preparing for possible scenarios. Several did not want to comment.

Nationwide Building Society, which does not currently offer business bank accounts, has no plans to take similar action to RBS/NatWest for either personal or commercial customers.

Barclays declined to comment on speculation over rate changes. It will be monitoring the Bank of England's decision and will notify customers and clients if there are any future changes as a result.

A spokesman for HSBC said: "HSBC has no plans to apply negative interest rates to sterling business or personal accounts."

As part of an update of its terms and conditions for UK business accounts in February, HSBC told customers that it reserves the right to apply negative interest to foreign currency deposits when the base rate for that currency goes below 0%. It does not currently intend to charge negative interest on such deposits, but it will let business customers know if it decides to do so in the future.

HSBC is charging banks and some non-bank financial institutions, such as hedge funds, for foreign currency deposits in currencies where negative base rates apply.

Many banking customers generally are already used to being paid nothing to keep their money with a particular provider. According to financial information website Moneyfacts, nearly three-quarters (72%) of personal current accounts on the market pay a zero rate of in-credit interest - although some may have other perks such as cashback.

:: Could the possibility of negative interest rates mean my lender starts paying me to have a mortgage?

Mortgage borrowers are already enjoying some of the cheapest rates on record - but they should not expect that their lender could start paying them.

Some mortgages are directly tied to the Bank of England base rate. Estimates from the Council of Mortgage Lenders (CML) suggest around 1.5 million existing mortgages are bank rate trackers.

In general, the rates on these deals track the movements of the base rate, plus a certain percentage margin specified by the lender. However, some major lenders' bank tracker rates for new borrowers have started creeping up in recent weeks, as speculation has mounted about the bank rate being cut.

Bernard Clarke, a spokesman for the Council of Mortgage Lenders (CML), said: "What a borrower pays is determined by the terms and conditions of the mortgage, but we are not aware of any circumstances in which a borrower would be paid by the lender.

"Borrowers receive an advance, and must expect to pay interest on it. Borrowing rates reflect a wide range of factors, and must cover the cost of running the lender's business."

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