As you may have read before, the Bank of England has increased the base rate from 0.1% to 0.25%, after months of delaying the increase; it is now official. The increase was made to hold the rising inflation rate that could peak at 6% in April
The increase was influenced by the uncertainty about the recent Covid events and to create a tighter monetary policy to maintain price stability in the coming months.
But what does the increase mean with regard to borrowing?
Some of your clients who have a business or commercial mortgage might end up with higher monthly repayments. Others with loans on Standard Variable Rates (SVRs) must wait and see if their lender will make the interest rate increase partially or in full in the coming months. A fixed-rate loan might be an option to consider, as it locks any interest rate rises and would allow a set amount to pay every month and provide more certainty in the period that the fix rate applies.
It is certainly a good time to review your clients’ current loan terms and conditions, as in some cases, borrowers on a fixed-rate loan could be better off. A re-mortgage could be an option, but it should be discussed with your business finance broker as every borrower has different opportunities and risks to consider.
Giles Codrington from our ASC London office comments, “An increase in the base rate will increase your monthly payments over the coming years resulting is an increase in their total loan costs in the long term. Whilst this increase by the Bank of England isn’t significant, it might be a sign of more to come in the medium future. We have already seen client’s taking this as an opportunity to look holistically at their positions and think about the borrowings they have in place. “
If you are unsure about your current loan or looking for a new one, get in touch with your local ASC office for more details. We don’t work for the banks; we work for our clients.