Business loan - fixed or variable
 

FIXED: 5 year fix 3.22% 10 year term but no overhanging penalties after fixed period.

VARIABLE: 2.06% + BoE base 10 year term, so presently 2.56%.

Arrangement fee is 1.5% of loan amount for both.

Rental income covers the fixed rate interest and capital repayments. If there was an interest rate shock in 5 years then we could cover it but it wouldn't wash its own face for a 10 year total term.

Crystal ball time, the 5 year fix is attractive at 0.66% extra, but some would argue that if the average rate over the next 5 years exceeds the present rate by 0.66% then loads of people would go bust so it won't happen.

Never gone for fixed rate before private or business. If there was a 10 year fix that would be very attractive as years 6-10 I could imagine much higher rates than years 1-5, but there isn't on decent terms.

For me it would be the fixed rate as you can predict what is happening with some safety, if for some reason the interest rates do go up (and I feel they will myself) it will mean recalculating P&L etc.

I suppose it is all about how risk averse you are.

And there really at this moment in time no right or wrong answer, unless you know something and if you do give me six numbers for Sat ;-)

Fixed, because although i don't see any immediate end to the low base rate, i think it will rebound fairly quickly when it does, and it will. If the variable option wasn't as long as 10 years then it might be worth more consideration, but that's a long time and if it's for business purposes, i just don't think that's a risk worth taking.

For 0.66% the difference isn't really worth the risk.

However, there is much talk of another .25% drop in base rate on the horizon.

Base has been so low for so long even a modest increase will ruin many of us. Take rates back up to 5% and what we've been through the last couple of years will look like a cake-walk.

Unless you are one of the chosen with no mortgage and lost of savings on deposit :)

Who is talking about another 0.25 reduction? Certainly not the Bank of England.

[crystal ball mode]

BoE rate is not going up for some time yet. The county is f*cked for at least 5 years more imho so they'll stay static for at least that long. I can't believe that they'll increase that much though even when they rise as the UK is used to low rates now and can't handle, say, a 300% increase "overnight".

[/crystal ball mode]

TX.

To repeat. NOT the Bank of England. :)

OK, let me try again.

http://www.thisismoney.co.uk/money/n...al-action.html

Or perhaps

http://www.telegraph.co.uk/finance/e...-rate-cut.html

It was banded about very briefly that they were *considering* it, might have been 2 months ago now but obviously came to nothing.

*sigh*

To repeat. NOT the Bank of England.

As part of their monthly minutes, a short statement regarding the discussion of interest rates is always included, as part of a broader discussion of policy.

Mervyn has stated publicly that cutting the base interest rate is not on the cards.

Please believe me this time, i'm paid to know what the MPC had for breakfast, let alone their stance on interest rate policy. :)

So you are saying that the Monetary Policy Committee is not part of the BOE? Because they are referred to as the Bank's committee and the notes clearly state they discussed a drop below the 0.5% base rate.

This is getting surreal. The notes say they discussed a drop in interest rates. What you're missing is that this idea was fully dismissed as other options such as further QE and a reduction on interest paid on deposits were felt to be more effective, should the time for more stimulus be necessary. The Bank base rate will not be cut to 0.25%.

No one is saying it wasn't dismissed. Only that the BOE discussed it at their policy meeting 2 months ago. In other words it was considered and then dropped as an option. You said it wasn't discussed but it was.

What???????????????????? They discussed it. They dismissed it. They are no longer talking about cutting the base rate. Who is talking about cutting the base rate. NOT the Bank of England. I'll start explaining with pictures if it helps.

Are you just wanting an argument for the sake of it as it's Friday afternoon? I put past tense, re read my post #10 where I said it was discussed 2 months ago, i.e. July which it was as confirmed by the notes. i.e. they had discussed it and it came to nothing. I haven't at any point said they are still considering it. Perhaps you are the one who needs pictures.

Utter bollocks. But i'm bored now. Go away and have a nice weekend. :)

Only bollocks is from yourself.

Who is "they" then Tel?

I also post 3 articles all relating to a further drop in rates - all referring to MPC minutes discussing a drop in interest rates.

My comment stands, your argument.....badly put....poorly worded.....fails. Bon weekend :)

we're discussing it

does that count?

(snetters know as much about it as the BOE as far as I can see)



which has always worried me btw

Edd why are you being a numbnut also? I don't get it.

The MPC discuss interest rates every month. As a result of those conversations, the BoE are not talking about cutting interest rates. There might be much talk of a cut of 0.25% in the media, but apart from bieng discussed at the MPC meeting, the Bank have categorically said that this is not a policy option. I just don't understand why you're being so obtuse about it. But "you win" if it makes you feel better, honestly i really don't mind. :)

:lol1: so i'm a numbnut. Right. What I said is correct so if calling me a numbnut makes you feel better then so be it.

As for it being dismissed, only in the short term.

From Point 29 of the minutes:

As for Merv coming out yesterday and predicting the next quarter would see an upturn in the economy you don't need to be the Govenor of the BOE to guess that, it's fcuking Christmas in 3 months so everyone spends stupid amounts boosting the economy :rolleyes: Then shock horror there will be a dip in the 1st quarter of 2013 whilst everyone tightens their purse strings after the Christmas outlay.

Latest quote after sorting out a load more details is 3.51% fixed for the full 10 year duration or 3.08% fixed for 5yrs, variable for 5yrs after. 1.5% arrangement fee and a valuation needed, whether variable or fixed.

I think the 10 year deal is attractive.

Ah this thread again :D

Just to be clear for all the hard of thinking, tomorrow's BoE minutes will most likely show that they discussed cutting the base rate, and concurrently, it will be dismissed as a likely policy option. :thumb:


John only you know if that fits in with your plans. If base rates go up you'll be a hero, if they stay low you'll have wasted money. Right here right now it's the par price for 10 year money. You either need the certainty or you don't. :)

Still can't read then? Post 10 still hasn't changed.

No, and it still says nothing apart from regurgitating some heresay/gossip call it what you will :lol1:

Trust me, if you can, i do this for a living; if you choose to misinterpret what i've said then fine, but please don't dress it up as you know what you're talking about and i don't, on the basis of a nuance. :thumb:

What I said in post 10 is factually correct. The panel who are part of the BOE discussed the drop in rates in July. It was dismissed. So yes it was discussed/suggested call it what you will but it happened and that is all that was suggested in this thread and you still deny it.

What is the sum? Thats the main question IMHO.
If its small, then take the fixed rate - the difference over the term is not going to be much.

If its medium, then I would consider variable and take the 0.6% for investment into the business. Your 0.6% might be worth more to you as cash flow, I dont know.

If its a large sum I would look back at the fixed rate. Either way, your interest paid is not really the problem as its a deductible expense... but you already know that.

I would be asking your accountant for advice too..

Different slant on things. . .

Largely depends on your gearing and how much profit you stand to gain with the investment from the loan.

If you are only making a small profit on the capital invested, I'd plump for the fixed loan as you have less room for manoeuvrability should the rates increase.

If you stand to generate large profits on the loan, (and thus have more resilience to rate changes) then perhaps go for the variable. You'll stand to make more money if the rates remain low, and have the flexibility to survive should they raise.

Thanks all. The 10 year fix seems best because the extra cost isn't that great, and I tend to be risk averse.