With the New Year should you be looking to take advantage of low interest rates?

12th January 2015

If you’ve been watching the press this week, you’ll have seen that there have been several reports on the cost of borrowing money. If you haven’t, then to put it simply, it has dramatically fallen of late. Over the past few months, the cost of fixing secured debt for long periods of time has dropped significantly to what we think are all time lows in a generation. It would seem this is driven by the massive drop in oil prices and deflation in the Eurozone (also good for fuel prices but not for subsidies or exports).

Coupled with this, there are a few more lenders now in the market place for the rural community and existing banks are stepping up their activity and trying to win new business and market share. It’s been quite a long time since we have seen banks really putting their necks out to win new business and it brings back some healthy competition, which is always good in whatever sector you work in.

On recent funding applications we have been doing and managing on behalf of clients, I’m just amazed at how cheap it is to borrow money over 20+ years and this is also filtering down in to the residential mortgage sector now as well (good job my mortgage is up for renewal!).

So this provides some excellent opportunities for businesses either looking to expand, re-organise debt or raise funds to sort out other family members/partners etc. For me, if I was looking at expanding this year, buying land, extending building facilities or to pay out a sibling etc I would be looking to do that now and take advantage before any rate rise.

I think it’s also a very good opportunity for those that have large overdrafts which aren’t being reduced, to think about putting some of that debt away on a longer term repayment profile. Firstly, it will be cheaper in that you won’t be paying annual arrangement fees (a lot of the banks are reducing secured lending arrangement fees now in order to win business) and will get you focused on ensuring that you have sufficient annual funds to make the loan repayment and get the debt reduced over a period of time. Often having the psyche of knowing you have to find ‘X’ amount each year for the loan and still remain within the overdraft limit will help you manage debt better and get it repaid.

Banks need to lend money, it’s how they make money, so they’re always going to be keen to support you but you need to give them the information to make it easy and a smooth process. So that means firstly showing assets you have as security and secondly, can you afford to make the repayments. That means up to date accounts, budgets going forward and 3 year cash flows. Get the info right to the lender and you’ll find a smooth and quick process with competitive rates.

May I wish everyone a prosperous New Year.

Louis Fell

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