Coping with Rising Interest Rates
Rising interest rates are a real worry in today’s climate, with many people struggling to pay the bills. The 5% increase in June saw rates at a 15-year high. But why is this happening and how can businesses, landlords and homeowners cope? Let’s delve deeper.
Why Are Interest Rates Going up?
As inflation in the UK is too high, the Bank of England has been repeatedly increasing the base rate of interest to try and bring it down. With the increase in borrowing costs so high, our disposable income is reduced meaning we have less to spend on goods and services. This reduction in demand forces companies to lower prices and inflation is reduced.
Raised prices can really impact businesses, landlords and homeowners. So here are some tips on how each group can cope until interest rates are reduced.
Advice for Businesses
Get your Finances in Order
The best thing for businesses to do during difficult periods is to get their accounts in order and prioritise tax planning. Tax advisors will check out the financial health of your company and recommend ways to keep things in order. Once you know the value of your business, you can then improve cash flow and find ways to cut business expenses.
Tips and tricks include:
- Working with cheaper suppliers
- Saving energy across the business
- Cancelling any unnecessary subscriptions
- Making the switch to remote working to save on rent
You should also think about raising prices. Be transparent with your reasons and try to keep your service quality high to maintain client respect. People know what’s happening in the wider world and are now used to companies raising prices to cover basic costs. If you’re struggling with cash flow, try to tackle late invoices by sending out reminders using automated software.
Advice for Homeowners
People with both variable rate tracker mortgages and standard variable rate mortgages are likely to see an increase in repayments due to interest rate rises. While this is far from ideal, you can cope by reassessing your monthly budget for food, social events and more. Try to reduce other bills where possible such as electricity and gas by switching to more efficient alternatives.
You should also seek mortgage advice to find the best option for you. Customers approaching the end of a fixed rate deal, for instance, can lock in a deal up to six months ahead. They can also apply for a better deal until their new term starts.
Advice for Landlords
Like regular homeowners, landlords are also impacted by interest rate hikes. Not only do they have to worry about increased mortgage prices but they also have to handle the knock-on effect for tenants. In a bid to keep prices low, always shop around for mortgage deals and use comparison sites. Keep on top of maintenance too as this will minimise the need for expensive repairs. If you’re struggling, selling could be an option. Speak to a tax accountant about reducing capital gains tax charges.