Find out if now is the right time for you to refinance
Mark Ashbridge, MD of CLA Finance advises CLA Members on funding opportunitiesBase rate fluctuates over time
With nearly 30 years in rural business and finance, I’ve witnessed firsthand how access to money and its cost fluctuates over time. When I began as a farm business consultant in 1996, the Bank of England (BOE) base rate hovered around 6% and for the next decade, it mainly stayed within the 4%–6% range.
In 2009, the BOE rate dropped sharply to 0.50%, staying under 1.00% for the next 13 years so the higher interest margins of that period were easily absorbed. However, with the rapid climb of base rate since 2022 many borrowers have found their debt servicing to be unsustainable.
Interest margins expand and contract
In 2001, I moved into agricultural banking. At the time, loans were typically priced at 2 – 2.5% over base, but in the following years competitive pressure in the banking market saw margins reduce by up to 50%. This all changed with the financial crisis of 2008 which triggered a fundamental shift: tougher lending criteria and a heightened focus on affordability coupled with significantly higher margins.
Savings are available if you refinance now
Thankfully the combination of recent base rate falls to 4% and renewed competition in the market means that many historical deals struck before 2023 are now ripe for refinance at significantly lower interest margins.
We’re actively helping clients refinance and restructure onto better terms. If you have substantial debt, now is a smart time to review your facilities. Here are three real-world examples:
- Estate Refinance – £650k Net Saving
A £80m estate with £10m debt was refinanced onto a 10-year interest-only facility, reducing the interest margin by 0.80% annually. After £150k in refinance costs, the net saving is £650k. We also restructured the loan to exclude assets with future development potential. - Using BTL mortgage to Fund CGT Liability
Ahead of the 2024 Autumn Budget, a client transferred ownership of their estate to the next generation, incurring an £800k CGT bill. Their existing lender offered 6% fixed over 5 years. We instead secured BTL mortgages at 4.20% fixed, saving 1.80% annually, about £70k over five years. - Bridging Loan to Enable Swift Relocation
A family needed to downsize quickly, buying a £4m farm before selling their £7m property. We arranged a £4.5m bridging loan, enabling the purchase at a total cost of £300k over five months.