Archives for July 2014

Interest Rates

image2History’s uncanny knack of repeating itself may well be tested with interest rates as the UK economy growth pattern continues. Its extremely unlikely we will see, at least in the foreseeable future, the kind of rates as seen in the late 1980’s. (From July 1988 to May 1992 Base Rate never went under 10%)

There’s pressure on the Bank of England to increase, little by little, rates;  not least because significant numbers of pensioners, savers and the like are seeing their savings eroded by the negligible returns on offer.

It could be argued the rate reduction to the current 0.5% (effective since early 2009) has done its job in increasing liquidity and giving borrowers some headroom.

Businesses have become used to low rates so increases will be poorly received but given the seeming inevitability of a rise its important businesses calculate the likely impact a rise in rates may have. No return to teen rates is expected but businesses should start looking at possible 0.5%/0.25% rises in their borrowing costs.