Archive: Expectations of an interest rate rise

Published 2 July 14

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The Bank of England last month indicated that interest rates could start to rise later this year, with expectations that they would be at 2.5% by the first quarter of 2017 from their current record low of 0.5%. The indication will not be a surprise to the market, with economic signals showing the economy to be growing once again.

For dairy farmers, an increase in the interest rate could have an impact on any loans taken by the business. A rise of half a percentage point for a £500,000 variable rate loan - for the construction of a new building, for example -would increase first-year repayments by £2,500. If rates were to increase by 2 percentage points on current levels, as indicated as possible by the Central Bank by 2017, loan repayments at the new rate would be £10,000 higher in the first year compared to loans taken at current levels.