Interest rate hike to 4% – Do you know what it means to your business?
As anticipated, the Bank of England (“BoE”) have raised interest rates today by 0.5% taking the base rate from 3.5% to 4%, having voted 7-2 in favour of doing so.
Rates were last this high back in 2008.
How will this impact your business?
If your business has an overdraft, and you are using your overdraft, the cost of this facility will likely be based on BoE base rate plus a margin. The rate increase of 0.5% today will be an immediate additional hit to your daily interest rate cost.
Variable rate loans
Any variable rate loans you have will be also likely be linked to the BoE base rate, and as a result your monthly payments will increase.
Coronavirus Business Interruption Loan Scheme (“CBILS”)
Depending on the terms of the CBILS loan, these monthly payments may also increase. It is important to review the terms of your facilities if you have not locked in a fixed rate.
Fixed rate loans
The repayments on these loans will remain unchanged until the expiry of your fixed term.
Bounce back loans
The bounce back loan rates were fixed and repayments will therefore NOT increase.
Bank of England future predictions
The Bank of England have forecasted the base rate will continue to rise to around 4.5% in mid-2023 before falling to just over 3.25% in three years’ time, which is still well above the historical lows of the last decade.
If you are worried about the impact of the interest rate rise on your business, please contact Gary Bonner or Gerard Gildernew on 028 8772 4697.
Gildernew & Co. Ltd make every effort to ensure the accuracy of the information herein. However, no reliance should be placed on any of the above without seeking independent professional accountancy, legal and/or financial advice.
Posted on February 2, 2023