Bankers ‘welcome’ new note policy with no interest for first six months
Banks are set to welcome the introduction of a new policy which will let customers pay back their promissories with no further interest, with some predicting a rush to put their money in.
The new note, which is due to come into force in the coming weeks, will not have any interest rate.
The bank will only charge interest if there is a deposit in the account and if the customer pays their balance in full within six months.
“The bank will accept only a cash deposit, or any other form of cheque or money order from customers,” said the Bank of England, which will oversee the new policy.
The note has been welcomed by many economists, but also some who believe the new system is not as stable as some have feared.
The Bank of Japan said in June it was considering introducing a similar scheme, and it has said it would accept deposits from anyone with a bank account.
Some economists are also concerned about the long-term effect of introducing the policy, with the Bank Of England estimating that it will lead to about 1.6m customers being put off their home mortgages.
Some believe it will also be hard for borrowers to afford a deposit for a loan.
Bank of Canada governor Mark Carney has also been sounding a warning about the risks of the policy.
“It will make it harder for the economy to recover, so it will take some time to get the economy back on its feet,” Mr Carney said last month.
“There is also the risk that it may create new bubbles that will undermine the recovery.”