The base rate of interest drives borrowing costs. Whether you are borrowing on a base rate linked loan or any other APR driven loan, your costs will rise when base rate does.
Since 2009 things have been pretty solid, reliably low base rates and we have all got pretty used to it. However, things have changed.
If you don’t believe me then 2009 was –
- The Ipad did not exist yet
- The Iphone was brand new
- Gordon Brown had yet to be recorded insulting the public
- Tottenham won the league title
OK, the last one was wishful thinking, but the others are true. The thing is, 2009 was a long time ago and things have changed since.
So are you ready for things to change?
Have a look at this chart from Bank of England and Bloomberg. It layman terms it shows how the anticipated movement in future base rates has changed.
The main thing this shows is that over the past 4 months we have seen a consensus of opinion that early 2015 will see base rates rise.
Does 2015 sound a long time yet? it’s not, so start thinking about it.
The idea of this post is not to scare but to get the question of a base rate rise on the table.
Not talking about your borrowing costs is a risky business. Base rates will go up, so budget for them and get the issue on the table.
If you want to work out what your borrowing costs could be in the future then use our free spreadsheet – loan_amortisation_schedule You can change the interest rate to whatever you want to budget for.
If you do use the spreadsheet then please add comments on the ‘reply’ button above.
If you have any comments about this article then please add them above, or contact us via the website.
By David Farmer