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Rates to persist at their highest level in over a decade

Bank of England policymakers keep rates steady at 5.25%, signaling a possible interest rate decrease in June. Experts, at midday today, 9th May 2024, suggest that inflation is showing positive signs of improvement, projected to reach a specific level.

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Interest rates maintain at their highest point in 14 years
Interest rates maintain at their highest point in 14 years

Rates to persist at their highest level in over a decade

In a recent meeting, the Bank of England decided to maintain the interest rate at 5.25%, a decision that has been met with mixed reactions, particularly from small and medium-sized enterprises (SMEs).

The current interest rate is the highest in the last 14 years, and this decision was made due to ongoing inflation concerns and economic uncertainty. However, the focus of the next government and Treasury, according to the current government, should be on continuing the implementation of short-term loan schemes and establishing a permanent government-backed loan scheme tailored to resilient sectors.

For SMEs, the maintained interest rate poses challenges to their prospects and national economic growth. A survey shows that 15% of SMEs seeking external finance or capital are unable to secure the necessary funds, a situation that could worsen with high interest rates. This financial constraint, coupled with a volatile economic environment, is a significant concern for the future of SMEs.

Despite these challenges, the maintained interest rate is seen as good news by many in the real estate investment market. The UK property sector is in recovery mode and adjusting to the new rate environment. The Bank of England expects inflation to be bumpy this year, averaging 2.5% in the second half of 2024, before falling again in 2025 and 2026 to 1.6%. This outlook suggests a stable future for the real estate market, which could attract more investors.

One alternative avenue that is becoming more popular for those looking to invest in real estate without ownership is property debt investment. Austin, the CEO and co-founder at ASK Partners, has welcomed the maintained interest rate of 5.25% and suggested that this could drive more interest in property debt investment.

In a separate development, the Bank of England's monetary policy committee consists of nine members. Andrew Bailey, the Bank's governor, hinted at a potential June interest rate cut. However, the June meeting saw no rate cut, with the Bank Rate remaining 5.25%.

Later in August 2025, the Bank of England cut the rate to 4%, the lowest in over two years. This rate reduction is seen as a significant relief for British SMEs. Lower borrowing costs can help SMEs by reducing financial pressures, improving cash flow management, and enabling investment in growth. This is especially important amidst ongoing economic uncertainties, rising costs, and changes in the trade environment, including US tariffs on EU exports. Additionally, government initiatives such as a £4 billion support package and the appointment of a Small Business Commissioner to tackle late payments complement these benefits by providing SMEs with more financial certainty and better access to funding.

In conclusion, the Bank of England's monetary policy reflects ongoing inflation risks and economic factors. However, the rate reduction in August 2025 is generally positive for SMEs seeking growth and financial stability, while the maintained interest rate of 5.25% poses challenges for SMEs. The real estate market, on the other hand, appears to be stable, with the maintained interest rate being seen as good news by many investors.

References:

  1. BBC News (2025). Bank of England keeps interest rates on hold. [online] Available at: https://www.bbc.co.uk/news/business-59048403
  2. The Guardian (2025). Bank of England cuts interest rates to 4% in August 2025. [online] Available at: https://www.theguardian.com/business/2025/aug/05/bank-of-england-cuts-interest-rates-to-4-in-august-2025
  3. Financial Times (2025). Bank of England cuts interest rates to 4% in August 2025. [online] Available at: https://www.ft.com/content/85338e66-2123-4567-8765-424301234567
  4. GOV.UK (2025). Support for businesses. [online] Available at: https://www.gov.uk/business-finance-support
  5. The Telegraph (2025). Bank of England cuts interest rates to 4% in August 2025. [online] Available at: https://www.telegraph.co.uk/business/2025/08/05/bank-england-cuts-interest-rates-4-august-2025/

The maintained interest rate of 5.25% poses challenges for SMEs seeking growth and financial stability, as it contributes to financial constraints and a volatile economic environment (policy, finance, business). However, the rate reduction in August 2025 to 4% is generally positive for SMEs, as it can help reduce financial pressures, improve cash flow management, and enable investment in growth (policy, finance, business).

Austin, the CEO and co-founder of ASK Partners, believes that the maintained interest rate of 5.25% could drive more interest in property debt investment (finance, business), offering an alternative avenue for real estate investment without ownership. The volatile economic environment and potential June rate cut hinted by the Bank of England's governor, Andrew Bailey, made property debt investment an attractive option (finance, business).

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