Christie Finance have seen lenders’ interest rate margins reduce over Q3 and Q4 of 2023 with fixed rates also benefiting. 

We asked independent economist Mark Berrisford-Smith to comment on the current state of the economy and his views on interest rates for the year ahead. 

“The cost of borrowing money will get cheaper during the coming year, but it would be as well not to let our expectations run ahead of the reality. The sharp fall in the rate of annual inflation in December unleashed a wave of exuberance in the financial markets, prompting mortgage lenders to offer lower fixed rates at the start of the New Year. But the falls in swap rates which made these cuts possible have now partially reversed, as financial markets have eased back on their bets that the Bank of England is about to launch a wave of base rate cuts. While it’s possible that inflation could fall quite sharply in the spring, assuming that the military situation in the Red Sea doesn’t derail the anticipated cuts in gas and electricity prices, the Bank of England will want to be sure that the inflation dragon has really been slain. The UK’s labour market remains unusually tight and “core” inflation, which strips out the volatile energy and food items, is still running at more than 5% therefore base rate cuts are unlikely before the summer. Assuming inflation continues to move back towards the 2% target, it would be reasonable to anticipate two or three cuts of 25 basis points each by year-end.” 

At Christie Finance we have witnessed more positivity in the market and a desire to re-invigorate the UK economy with lenders recently reducing rates and making it more cost effective to buy or expand.  

Our hotels sector experience has seen some positive results, with rates  as low as between 1.5%-2.0% above Base Rate being achieved as demonstrated by a recent example of a 70+ bed spa hotel located in Derbyshire:   

• Refinance of existing hotel 
• The asset is valued at £11m+ 
• We engaged with numerous lenders, which were all keen to lend against the hotel 
• Through this multi-lender engagement, we were able to obtain indicative terms of 1.39% above base 

Another example within the care sector is a 17 bed care home located in Dorset:

• Client looking to purchase a third care home
• Purchase price is £1,150,000
• Existing care homes each had outstanding finance with separate lenders
• Total Loan was for £2,457,000 at 2.3% plus base over a 15 year term

Lenders have recently reduced rates above the bank of England base rate , both on variable and fixed rate options. Some high street lenders have been setting rates at c.1.5% above base rate on variable rate loans, subject to the sector and deal structure. 

Rate reductions have been seen across most sectors; however, it is important to note that on the lenders’ side there is more reliance on detail and financial forecasting to ensure the numbers align with the current market or with potential changes to base rate and other external issues that impact the UK economy. 

In summary, we have seen that variable rate margins have largely remained at c.2.0% to 4.0% above base rate for most lenders, and it is anticipated that the Bank of England will cut rates as inflation moves towards the Government’s target of 2%.

Christie Finance remains dedicated to providing innovative and valued insight to uncover opportunities for our diverse range of borrowers. Despite the impact of higher interest rates, there is still strong support for experienced operators and first-time buyers in sectors such as healthcare, childcare, and pharmacy. Our team is committed to helping clients navigate the changing landscape and secure funding, whether for acquiring businesses or refinancing opportunities. We understand the importance of factoring in the total cost of loan repayments and remain dedicated to providing timely and accurate advice to our clients, ensuring they are well-informed about the implications of the current interest rate environment. 

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For further information on this blog, contact:

Niamh Toman
Junior Corporate Communications Executive
T: +44 7768 646 984
E: Niamh.toman@christie.com