Finance Monthly. 37 Business & Economy According to our recent research, 40% of SMEs - compared to 27% last year - have had to stop or pause an area of their business due to a lack of external financing. The unavailability of finance is exacting a toll on SMEs and the UK economy, impeding growth precisely when it is most needed. The magnitude of the hindered growth is substantial and calls for novel solutions to bridge this funding gap. Since the economic upheaval caused by the pandemic, we have been advocating for a government-backed loan scheme that provides targeted supported for specific sectors, bringing together both traditional and alternative lenders to secure the future of SMEs. As the government looks for ways to curb the highest rates of inflation in decades, the significance of implementing a permanent scheme cannot be underestimated. It could be the crucial factor that determines the survival or failure of many companies and, consequently, the overall economy.” Adrian Anderson, Director of property finance specialists, Anderson Harris “Today’s news that the Bank of England has raised interest rates once again to 5% spells more mortgage misery for millions of homeowners. “There have been some 4 million first time buyers since 2009; a whole generation of homeowners have only ever seen ultra-low mortgage rates and for many, today’s rate rise will force a period of serious lifestyle readjustment. “UK mortgage holders are highly exposed to interest rate risk as our rates are usually very short term (2-5 year fixed for example) compared to the US and Europe who have fixed rates for the duration of the mortgage, some 25 years or more, hence they are able to better budget monthly payments. “42% of homeowners who purchased a property in 2021 took a 2-year fixed rate when mortgage rates were historically at an all-time low. This is the group of homeowners who are most likely to be hit the hardest. “Compounding this, property prices compared to income are much higher now than they were in 1989/1990. We are carrying a considerably greater debt these days than 20 years ago hence a rate today of 6% is similar to a mortgage holder paying 13% in 1989/1990. “Some of our clients are genuinely scared about how they will service their mortgage. Their largest commitment has increased at the same time all other outgoings have increased. “It may feel frightening but don’t stick your head in the sand. Fixed rates are predicted to continue to increase over the short term so reach out to an independent mortgage broker who can advise based on your circumstances. “If you are concerned about making your monthly mortgage payments, speak to your bank straight away. Banks have dedicated teams to try and help you through this challenging period.” Will Marwick, Chief Executive Officer for IFX Payments, says: “Today’s decision comes as no surprise. Despite back-to-back rate increases, inflationary pressures are continuing to mount, and the MPC is struggling to steady the economic pressures on the country. “The 13th rate rise in a row could cause havoc on businesses with frequent cross-border payments. They need to be paying close attention to movements in the pound and doing everything possible to shorten payment timelines to minimise opportunity cost. Working with a reliable payment provider removes the burden of managing complex payment processes and helps to avoid the financial implications of last-minute rate movements.” 42% of homeowners who purchased a property in 2021 took a 2-year fixed rate when mortgage rates were historically at an all-time low.
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