Commenting on today's decision by the Bank of England Monetary Policy Committee (MPC) to raise interest rates by 0.25% to 4.25%, David Hudson, AMC's Chief Agricultural Adviser, the UK's largest agricultural mortgage lender, said:
"UK consumer spending is booming although a manufacturing depression remains. The MPC resisted the temptation to raise interest rates last month while they assessed the impact of February's rise but a further rise was always inevitable.
"With total borrowings standing at nearly £8 billion at the end of December 2003, the interest only cost to the agricultural industry of a 0.25% interest rate rise is in excess of £20 million. At a farm level, the average agricultural mortgage lend by AMC is approximately £150,000, so this increase of 0.25% on the mortgage rate is £375 a year or £31.25 a month on an interest only basis."
Tim Porter, Agriculture Director, Lloyds TSB Group, said:
"This latest rise is part of an expected trend to higher interest rates by the year end. From end-2003 levels we could still see a full one percent rise by December 2004 taking the rate to 4.75% so farmers need to be prepared for those further rate rises.
"We cannot stress the importance of keeping on top of cash management in order to minimise finance charges. It is vital that farmers get to grips with accurate forecasting and budgeting," said Mr Porter.
