Cashing out

What could be more terrifying than a return to the 15 per cent interest rates with which homebuyers had to contend in the early 1990s? Possibly the vision presented last week in UBS’s Global Economic Outlook: interest rates at minus 5 per cent. It would take us to an unknown world where savers who deposited £100 in a bank would return a year later to find only £95 left.

This month’s small rise in interest rates has rekindled fears that the era of ultra-low rates could be at an end and that millions of borrowers, enticed into loans thinking rates of virtual zero are normal, could be left with debts they could not repay. But there is an alternative scenario. UBS notes that during the last crisis the Bank of England slashed rates from a peak of 5.75 per cent in the summer of 2007 to a low of 0.5 per cent 18 months later.