The Bank of England has announced that interest rates will be held at 5.25% – find out how this will impact you as a dental professional.
Today (9 May) the Bank of England revealed that interest rates will be held at 5.25%. However it also suggested that cuts are likely in the future, perhaps as early as next month.
The Monetary Policy Committee voted seven to two in favour of keeping the rate the same. This is the sixth time in a row that the rate has remained at the 16-year high of 5.25%.
Bank of England governor Andrew Bailey said he was ‘optimistic’ that inflation would continue to decrease. He said: ‘We’ve had encouraging news on inflation and we think it will fall close to our 2% target in the next couple of months. We need to see more evidence that inflation will stay low before we can cut interest rates. I’m optimistic that things are moving in the right direction.’
Bailey said that a reduction to the cost of borrowing in June was ‘neither ruled out nor a fait accompli’.
We heard from two dental finance specialists on the impact of this announcement for dentistry.
Ranjit Virk, financial adviser at Wealthwide
Today’s decision by the Monetary Policy Committee (MPC) to hold rates for the sixth consecutive meeting will bring some good news on potential rate cuts later this year. The committee was split seven to two, with two members voting for a cut. The better news for dentists with variable rate loans is this increases the likelihood of a rate cut in the coming months, which will be attractive to dentists with commercial loans linked to the base rate.
Another important factor for practice owning dentists is the outlook for inflation over the coming years has been decreased with estimates dropping to 1.9% in two years and 1.6% in three years. This will help with wage costs as wage inflation also looks set to decrease over the coming years. The other impact of falling inflation is the impact on materials, allowing more manageable increases in supply costs.
The outlook for residential mortgages still seems unclear. Despite today’s announcement, mortgage rates are increasing again for dentists looking to re-finance or get a mortgage. The chance of significant reductions on residential mortgage rates seems unlikely in the coming year but we live in hope.
High interest rates are of course great news for those with cash savings. If you’re struggling to keep on top of the latest high interest accounts, we’d suggest using a cash platform where you have access to 30 to 40 bank accounts, giving you the flexibility to select the best rates, terms and access, and retain 100% of your FSCS protection.
Iain Stevenson, head of dental at Wesleyan Financial Services
For dentists – particularly homeowners or those looking to get on the housing ladder – the immediate implication of the bank’s decision to hold interest rates will be the likely lack of relief on mortgage rates.
House prices have been falling recently, and we’ve seen most of the main mortgage lenders set out plans to actually put their rates up. Many people will have been hoping for a rate cut, so today’s news won’t be welcome from that regard.
The bank is playing its cards very close to its chest when it comes to when it will start to bring interest rates down, but the good news is that one is still expected to be sometime this year. In the meantime, those seeking a mortgage, or remortgaging, will have to continue to accept higher rates than they could get two or five years ago.
It’s also likely to keep the cost of debt higher, for longer, which may affect those looking to secure financing to buy or expand dental practices. There may be good deals out there however for specific circumstances, so it’s always worth doing your research and seeking professional advice on the market.
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