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Increase in interest rates

On Thursday 2 August 2018 the Bank of England base rate increased from 0.50% to 0.75%. Mark Carney, the Bank of England’s governor, said there would be further “gradual” and “limited” rate rises to come. Some analysts are taking this to mean one or two more increases of 0.25% over the next two years.

To put this into context in July 2007 the rate was 5.75%. Since 1971 the average rate has been in excess of 7% and in November 1979 reached a high of 17%.

If you have a Fixed Rate loan then the increase will not affect you until the end of the Fixed Rate period.

If you have a variable rate loan the impact will depend on whether the loan is interest only or not and if not interest only then the length of the loan remaining.  If we looked at a £250,000 interest only loan then the increase will have an impact of just over £52 a month.

It is therefore important to understand your business cash flows as the impact of the rate increase will potentially impact on profitability and cash requirements.

At Ellacotts we would be happy to assist with future forecasts for your business. If you need more information then please contact Derek Boughton on dboughton@ellacotts.co.uk, call 01295 250401, or visit our website – www.ellacotts.co.uk.