Will Commercial Borrowing Levels Increase Following Drop In Base Rate

In recent weeks, we have made reference to the fact that, here in the UK, there has been a drop in the amount being borrowed by way of development finance, bridging loans and lending to businesses in general. A few days ago, the Bank of England made the decision to lower the base rate from ½ % that has been at that level for many years to a ¼ % and it will be interesting to see if this has any impact on the amount being borrowed by businesses.

Will the reduction in the base rate result in an increase in borrowing by businesses?
The Bank of England reduced the base rate to 0.25% a few days ago.

There has obviously been some concern amongst a number of business owners following the Brexit vote as to the potential negative effect that leaving the European Union may have on their businesses. In particular, a number of those businesses that trade on a regular basis with their counterparts in European Union countries are no doubt particularly concerned about the impact that the decision by the UK to come out of the EU may have on their sales and profitability.

Following the base rate reduction, customers that are on borrowing packages that are on a variable rate of interest or tracker rate will no doubt find their borrowing becomes cheaper with their repayments reducing and that may encourage more businesses to borrow funds. It will be interesting to see if some of those lenders that offer lending products that are on a fixed rate of interest change their rates over the coming days/weeks.

There are so many lenders that provide commercial lending packages that it is worth shopping around to try to obtain a competitive package rather than do what a lot of customers do which is just to apply for finance through their bank or building society where there business account is maintained. In this respect, a business owner has a number of options such as doing their own research or using a specialist broker that has access to an extensive panel of lenders.

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