Static bank rate hides underlying indicators of future rises
The Bank of England may have kept interest rates on hold again, but farmers have been warned that the cost of borrowing could be set to rise.
Last month two of the economists on the Bank of Englands nine-strong Monetary Policy Committee voted for a rate rise, says Adam Chester, economist with Lloyds TSB Corporate Markets.
If they have been joined by others this month then it could signal a future rise in base rates is not far away.
In Lloyds Banking Groups latest quarterly economic bulletin base rates are predicted to be at 0.75% by the end of 2011 and at 2% a year later.
Once the Bank of England is confident the economy is growing more strongly, then it will probably want to raise rates to dampen inflation, adds Mr Chester, warning that the rates that banks lend between themselves are already increasing, especially for loans over longer periods.
Strong economic growth across the world is also pushing up lending rates and the UK is not immune from that.
Gareth Oakley, head of agriculture at Lloyds TSB, says that now is a good time for farmers to be considering their borrowing requirements over the short and longer term.
The rising cost of inputs such as fuel, fertiliser and feed will put pressure on businesses in the shorter term, while those considering longer term investments should be discussing how they can most effectively fund them with their bank managers, says Mr Oakley.
We believe that farming has a strong future, but businesses need to be aware of the impact interest rates, economic growth and inflation will have on them. Lloyds TSBs agricultural managers continue to give farmers the support they need and in 2010 we were able to welcome more than 900 farming businesses who switched from other banks.
Lloyds TSB Agriculture provide a personalised banking service to farmers and rural businesses delivered through a network of over 150 staff, made up of over 80 specialist agriculture managers and 70 support staff, based in 44 rural offices throughout the UK. In recent years Lloyds TSB Agriculture has seen strong growth in its acquisition of new customers – the rate of customers moving to Lloyds TSB Agriculture from other banks currently stands at around 900 farmers per year.