As interest rates drop to 0.25%, is now the time to borrow for business investment?

Last week the Bank of England’s Monetary Policy Committee voted to cut their base rate to 0.25%.

While savers up and down the land greeted the news with irritation – returns on savings were bad enough before – it will no doubt have put a spring in the step of businesses and individuals who need or want to borrow money.

It was also good news if you’ve had to pay your taxes late for one reason or another. HMRC’s interest charges for late payments are linked to the base rate and will therefore be cut. The reductions will come into force from 15th August for quarterly instalment payments and from 23rd August for other instalment payments.

The rate reduction was deemed necessary in conjunction with other measures designed to deliver additional monetary stimulus. Explaining the Monetary Policy Committee’s reasoning, the Bank said:

“The cut in Bank Rate will lower borrowing costs for households and businesses.  However, as interest rates are close to zero, it is likely to be difficult for some banks and building societies to reduce deposit rates much further, which in turn might limit their ability to cut their lending rates. In order to mitigate this, the MPC is launching a Term Funding Scheme (TFS) that will provide funding for banks at interest rates close to Bank Rate.  This monetary policy action should help reinforce the transmission of the reduction in Bank Rate to the real economy to ensure that households and firms benefit from the MPC’s actions.”

So, if you’re thinking of expanding your business, now is a great time to start looking round for low-interest loans. If you have ideas and plans you’d like to put into action, please get in touch with one of THP’s account managers.

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