The Repricing of Money

Something has happened in the last twelve months, which is now having a material impact on businesses and households right across the globe.

Central Banks, everywhere, have decided to increase their base interest rate, which today in the UK stands at 4.25%.

In October 2022, only 18 months ago, the base rate stood at 2.25% in the UK.

In March 2020, the base rate dropped to an all time low of just 0.1%, as the Bank of England sought to help people though the COVID 19 situation.?

* 05 March 2009??0.5%

* 4 Aug 2016?????0.25%

* 02 Aug 2018????0.75%

* 19 Mar 2020.???0.1%

* 16 Jun 2022????1.25%

* 03 Nov 2022.???3%

* 23 March 2023.?4.25%

???????????????????????????? ?? **Bank of England base rate?

As you can see from the above, the rate has increased pretty quickly in the last 18 months, and as inflation continues to be a problem for everyone, the Bank of England have went on the record to say they may not be finished with rate increases.?

The outworkings of all of this of course is the impact on the cost of our mortgages and business loans across society.

On the residential mortgage front, It is estimated that over 2 Million people are coming out of mortgage deals in 2023, who will have to refinance Into products that could mean their monthly payment doubles or even triples in some cases.

Clearly this is going to be hugely problematic for so many households.?

On the commercial debt front, again as the base rate is now some 4.25%, this along with the lenders margin, (often a minimum of 3/4%) means that for many businesses, repayments of loans becomes unaffordable, and again incredibly problematic.?

We are starting to see some of these problems play out, as borrowers start to come to terms with the fact that refinancing a loan, or securing funding for a new project, in this new economic climate, where the cost of funds is substantially more expensive, is becoming quite difficult.

At GDP | Corporate Finance and Restructuring we have been working in the debt restructuring and funding space now for over eleven years, so have extensive experience in resolving some of the issues now facing many of our clients yet again.

Since the turn of the year, we been starting to see more and more people enter into financial distress, and on many occasions, as a direct result of the repricing of money.

An important point to make would be, we do not see this as a temporary development, the result being money is going to be a lot more expensive moving forward, certainly over the short to medium term.?

If you find yourself in a position where you are struggling with debt or perhaps sourcing a new facility that works for you or your business, it is incredibly important that you take immediate and appropriate action.

Reach out to our team today, if you need some help with this.

Best,

Conor?

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