The Bank of England has today (4 December) announced another cut in interest rates, from 3% to 2%.
The 1% fall is the fifth cut this year, designed to stimulate a faltering economy, and takes base rate to the lowest level since 1951.
NFU president Peter Kendall welcomed the news, but was concerned many farmers and rural businesses were not fully benefitting from base rate cuts as banks appeared to be seeking to offset their own lending concerns by increasing margins and introducing new fees and other terms.
“This activity may be for some legitimate reasons but seriously hampers the ability of farmers as small businesses to benefit from rate cuts and help drive the British economy forward.”
The NFU has launched a survey of its members in order to gauge how their relationships with banks have changed in recent months.
Mr Kendall also called for SPS payments to be paid as early as possible.
“Although around 80% of Welsh farmers should be getting their payments before Christmas, England is still suffering from the legacy of 2005/06 when a more complicated system of SPS payments was introduced. Although the position is better today than in previous years, we will not be satisfied until our performance matches that of Scotland and Wales.”
Visitors to the FWi forums have also been less than optimistic about whether the full cut will be passed back by lenders through lower rates – see below:
“Base rate is getting to be irrelevant, banks are not lending at all. I was asking about a short term loan to fund a new grant scheme (£40k for 6 weeks max) and was told that it could not be done. Secured lending was 7% over base.” He his-self
“Wont help a lot of people – look at the small print! A lot of loans, mortgages, etc, have conditions specifying a minimum lending rate, below this they won’t go, so even if you have a tracker, you may find a condition of your mortgage is that the rate you pay will never go below 4%.” Teslacoils