Farmers looking at using long term loans to fund investment are
being advised to choose their lender carefully, acting sooner
rather than later to avoid rising costs in the banking sector.
The advice comes as longer-term fixed interest rates are
becoming more expensive despite The Bank of England's bank rate, or
base rate, remaining at a historically low rate of 0.5% for the
last 21 months.
With continuing concerns over the economy and cuts in Government
spending, experts do not forecast any significant increase in the
Bank of England bank rate during 2011.
However this long term stability creates a false sense of
security, with an increase in the cost of longer-term fixed rates
likely.
London Interbank Offered Rate (LIBOR) is the interest rate at
which banks borrow funds from other banks, using this to calculate
what they can offer to borrowers. Historically the Bank of
England's bank rate has followed the LIBOR rate, but this has been
rising throughout 2010 and is predicted to keep rising.
The implications for borrowers is that using a reviewable
facility, such as an overdraft or loan, is likely to result in
interest rate margin and renewal fees rising further as banks
recoup the cost of funds. Major borrowing on an overdraft or 'on
demand' loan should be reviewed and replaced by long-term
facilities in order to protect against the rising costs of finance,
preventing further fees.
Loans from lenders such as the AMC can help those in the rural
community by offering a mixture of fixed and variable rates that
are more beneficial to the borrower.
Holly Richardson of chartered surveyors Fisher German comments
"Loans from the AMC can initially take advantage of low variable
rates and as these increase, can be converted to a fixed interest
for the rest of the loan.
"For those in the rural community looking at borrowing, I would
strongly advise speaking to an AMC registered agent. They can help
provide long term loans for 5-40 years, with long term interest and
fixed rate loans for up to 40 years, 5 years flexibility facility
as well as a secondary overdraft with fixed fees and margin for 5
years".
For further information about AMC loans and their use, please
contact Holly Richardson 01858 410200 or email
holly.richardson@fishergerman.co.uk
For more information about Fisher German, please visit their
website here: www.fishergerman.co.uk