The Bank of England's Base Rate Increase and What it Means for Dentists
The last Bank of England Base Rate increase took effect on 4th August - changing from 1.25% to 1.75% - and this increase has already had a significant impact on those with finance loans. So, with the announcement of yet another increase - this time to reach 2.25% - what exactly does this mean for you and your dental practice?
In this post, we will explore the potential implications of this rate rise on your finances and what steps you can take to mitigate the effects and ensure you maximise those dental practice savings.
What Does the Rate Increase Mean?
The first and most significant thing to consider is that, if you have a variable rate loan or overdraft with your bank, your monthly repayments are likely to go up. This is because the interest you pay on your outstanding balance is determined by the banks interest rate plus the Bank of England Base Rate. When the Base Rate goes up, so do the monthly payments on variable rate loans and credit cards. If you have a fixed-rate loan, your repayments are not affected in the same way as those with variable-rate products.
How much this affects you will depend on how much you have borrowed and what the interest rate is on your loan. If you have a lot of debt, then the increased repayments may put a strain on your cash flow and make it difficult to keep up with payments.
Is it Better to Fix Into a Deal?
If you are worried about how the interest rate increase might affect your repayments, one option is to look into fixing your loan into a deal. A fixed rate is determined by cost of funds and not Band of England Base rate. This means that, regardless of what happens with the Bank of England Base Rate, your interest rate and monthly repayments will stay the same for a set period. Doing this can give you some peace of mind and make budgeting easier, as you will know exactly how much you need to set aside each month.
Of course, there are some things to consider before fixing into a deal. You may not be able to take advantage of any future interest rate decreases if the Bank of England Base Rate falls while you are still in your fixed period. Additionally, if you want to repay your loan early, you may have to pay a fee. It's important to weigh up the pros and cons of fixing into a deal before making a decision.
What Else Can You Do to Mitigate the Effects of the Rate Increase?
There are a few things you can do to ease the strain on your finances if the interest rate increase has made your monthly repayments unaffordable…
Look into Refinancing Your Loan with a Specialist Dental Finance Broker
This means taking out a new loan with different terms, which could include a longer repayment period or a lower interest rate.You may also want to consider speaking to a specialist dental finance broker about your options. Whilst the bank of England base rate is going up, there are still some very competitive rates and deals available from lenders. A specialist broker will have the right contacts at the banks with the right expertise and confidence to be able to offer you the best deal for your dental practice.
Regularly Review Your Business Loans
By conducting regular reviews of your business loans, you can ensure that you are getting the best deal. This process involves taking a close look at the interest rates you are paying, as well as any fees or early repayment charges. If you find that you could be getting a better deal elsewhere, then it may be time to switch lenders.
It should be noted that the demand to lend in healthcare remains healthy, and there is a huge appetite in this sector for new lending. However, as the market is constantly changing, it is important to continuously review any existing lending to maximise cost savings for your practice.
The Bottom Line
As you can see, while the Base Rate increase announced by the Bank of England will have an impact on many dental practices, there are steps that can be taken to minimise this impact. Regularly reviewing your business loans and taking advice from a specialist broker are two of the best things you can do to ensure that your practice stays on track financially.
If you have any questions or would like to speak to a specialist broker, please get in touch. Henry Schein Financial Services is a specialist dental finance broker who can help you refinance your loan and save money in the process. We deal with the healthcare specialists at the bank, so we are talking to the right people, with the right expertise and confidence to offer our clients the very best terms. Our relationship with the lenders means that we receive preferential rates - saving you both time and money. As with any loan, cases are assessed on their own merits, however, when arranging a loan review with us, we put the case forward to the banks in the most positive light in order to source the very best deal.
Contact us today for a free review of your business loan!