INTEREST RATES are to rise by 0.25%, the Bank of England‘s Monetary Policy Committee has announced.
The rise is the third since November 2003 and takes the new base rate to 4.25%.
The committee‘s decision has been widely predicted by economists, as consumer debt and house prices are continuing to rise.
And, financial experts are warning, that further increases are likely this year.
Richard Lole, national agricultural policy manager at Barclays bank, said:
“I would still expect to see further increases. The Treasury is projecting an increase of up to 0.5% by this time next year.”
“Agricultural borrowing in the UK stands at £9bn, so a 0.25% rise would cost £23m in added interest,” said Mr Lole.
“But looking at the industry as a whole, it is unlikely to cause business issues for many individuals, but it is an unwelcome extra cost nevertheless.”
David Hudson, chief agricultural adviser at the Agricultural Mortgage Corporation, said although the committee had resisted raising interest rates last month, today‘s decision was inevitable.
“The average agricultural mortgage lend by AMC is approximately £150,000, so this increase of 0.25% on the mortgage rate is £375 a year, or £31.25 a month on an interest-only basis,” he said.
Tim Porter, agricultural director at Lloyds TSB, added that it was vital for farmers to get to grips with accurate financial forecasting and budgeting.
“We cannot over-stress the importance of keeping on top of cash management in order to minimise finance charges.”