The MPC meeting today (7th November 2024) saw the Bank of England base reduce to 4.75%. So what does this actually mean for you and your business?
Whilst of course, the Bank rate does play a part in the overall rate you will pay, funding rates are made up of far more than just the Base Rate. Funds aren’t sourced directly from the Bank of England, so there are several layers that make up their costs:
- Base rate
- Cost to their source for purchasing funds – margin above bank rate
- The funder’s margin
- Our margin
Most of our funding routes’ rates are based on SWAP rates. These are generally determined by market forces such as supply and demand and expectations of future interest rate movements. This means that the funder’s rates will not always directly reflect the change in Bank Rate, as potential movements in Bank Rates have been taken into consideration in advance.
We would suggest that purchasing decisions should be made as and when required to help the business grow, rather than in line with the Bank Rate movements, as a reduction in the base rate, is likely to make less impact to the payments than you may have originally thought. This means it is worth considering how much you could potentially lose out on in savings/income through not proceeding with a purchase.
For example a 0.25% reduction on the funder’s yield over 5 years on a £50,000.00 purchase will reduce the monthly payment by only £6. Over the term this will mean an overall reduction in interest of £360.
At Focus, we will always do what we can to ensure that we provide the best solution for your needs and it is our job to give our clients all the information we can to ensure the right decision for their business.