Interest rate hike raises pressure on farm borrowings
Farmers have been warned to take extra care of their costs and production efficiencies following the Bank of England’s unexpected decision to raise interest rates.
The third rise since August saw rates increased from 5% to 5.25%, their highest level in six years.
The decision by the bank of
Rising prices and increased borrowing had kept consumer spending high and added to inflationary pressure. The Consumer Price Index has been above its 2% target for seven consecutive months.
Tim Porter, Lloyds TSB agricultural director, said high fuel and input prices meant the rise was likely to have a “significant impact” on farmers.
However, continued increases in farm asset values, particularly buildings and land, as well as higher commodity prices would offset the effects of the rate rise for some farmers, he said.
NFU cheif economist Carmen Suarez said with levels of debt at record levels in the farming industry, the increase could “make things tighter” for farmers and warned they needed to be extra vigilant about their costs.
“Debt is one of the major factors in increasing costs in farming, and while prices are improving for some producers, they need to keep an eye on their debts,” she said.
“The advice is the same as in the past. They need to analyse costs carefully and analyse production efficiencies.”
“This rate increase is going to make things tighter for some farmers and reinforce any debt problems they may already have.”