For just the second time in a decade the Bank of England has increased its base rate sending the media into a frenzy about the potential ramifications on the UK population. You too might have given some thought as to how the increase from 0.5% to 0.75% could affect your finances now and into the future. You will be pleased to hear then, that the overall impact to you on both a professional and personal level will be relatively minor in the grand scheme of things as the rate is still incredibly low. However, there are a few changes to be aware of.
From a business perspective there shouldn't be too much of a financial backlash, but it is worth bearing in mind that if patients’ outgoings increase as a result of the rise, they will have less spare cash to spend with you. Now, it is likely that this won’t make all that much difference in most cases, but it may put some people off from using their hard earned money for non-vital treatments such as tooth whitening or a smile makeover.
Owning/buying a dental practice
Now, if you already own a dental practice outright or you are on a fixed-rate loan then the base rate hike won't make a difference to your financial situation. However, if you have an outstanding loan and the repayments are linked to the Bank of England’s rate then the rise will mean an increase in your monthly payout, which could affect your profit margins. Anyone looking to purchase a practice moving forward can also expect higher repayments, though rest assured that most lenders carry out a ‘stress test’ to establish if you can repay the loan, so as long as you can still pay the rise won’t affect your chances of borrowing.
Mortgages is where it gets tricky, as it all depends on what type you have. For instance, if you are on a standard variable rate mortgage then your rate could go up as they tend to be influenced by changes to the base rate – but it’s up to the provider. A tracker mortgage on the other hand will definitely incur an increase as they are directly linked to the Bank of England’s rates. If you’re worried what this could mean for your repayments be sure to seek expert advice from a trusted adviser, who can help guide you through your finances and possible remortgaging options. But hurry before all the good deals disappear! However, if you’re one of the majority of people that have a fixed-rate mortgage, then you won’t be affected at all. Just remember that when the agreed length of your fixed-rate is up you must take care to find a deal that is equally as attractive. Again, an Independent Financial Adviser (IFA) will be able to help you with this.
The interest rate rise could also impact you if you are a first time buyer hoping to get on the property ladder, but if you play it smart then you could end up with a good deal. Explore all your options, but be sure to take into consideration that the base rate is likely to rise over the coming years (possibly as early as 2019). As for the property market, the 0.25% increase will probably have little sway on the current state of things given that the country is still facing uncertainty over Brexit, amongst other things. Still, it will be worth monitoring moving forward.
It is with savings that you should be better off, because when the base rate rises, so do savings rates – well, in theory at least. At the time of writing a number of banks and building societies have yet to pass on the full 0.25% rate rise, meaning many will experience a delay in reaping the rewards of their hard-earned savings. In time though, the rate should trickle through and you should see an increase in your returns. Make full use of your Annual Allowance if you have an Individual Savings Account (ISA) to get the maximum benefits. Or, if you want to make the most of your pension pot, it might be worth considering investing in an annuity.
Here to help
Should you have any questions about the base rate rise or want to discuss your savings, mortgage, loan or buying a practice with an experienced specialist IFA, then contact money4dentists now.
For more information please call 0845 345 5060, email firstname.lastname@example.org or visit www.money4dentists.com