The Bank of England this month opted once again to maintain the base rate of interest at its historically low level of 0.5% despite growing expectations of a rise – so what does this mean for businesses?
Ahead of the decision, the British Chambers of Commerce had expressed the concern that “familiarity breeds contempt” and that those calling for a rise were doing so out of a desire for any change, as opposed to what is best for monetary policy.
“I worry that familiarity has bred contempt when it comes to the importance of low rates in our current economic circumstances,” said BCC director general John Longworth.
“Businesses see no convincing argument to raise interest rates at the moment. Indeed, doing so would be rash, premature and could potentially stifle growth.”
Ultimately it seems the members of the Bank’s Monetary Policy Committee agreed, with the exception of Ian McCafferty who preferred a 0.25% increase in the base rate – a signal that, even in the MPC, there are rumblings of a potential rise in the near future.
“Given the likely persistence of the headwinds weighing on the economy, when Bank Rate does begin to rise, it is expected to do so more gradually and to a lower level than in recent cycles,” the MPC’s statement read.
“This guidance is an expectation, not a promise.”
The base rate has now stood at 0.5% since March 2009, more than six years ago – yet the statutory interest rate on aged debts from that time could still be as high as 10%.
Statutory interest is often said to be charged at 8% plus the BoE base rate, but in fact it uses the ‘reference rate’ – which is set from the base rate only twice a year, at the end of June and December.
At the end of 2008, the base rate was 2%, so the statutory interest rate remained at 10% through until June 30th 2009.
Due to the statute of limitations, any debts that have not been acknowledged in more than six years are likely to be statute barred, meaning you can no longer chase for payment; however, if the debtor has acknowledged in the meantime that they still owe you money, or made a partial payment then stopped, the debt may still be active.
With interest rates at an all-time low, that could make the 8% or higher rate of statutory interest on aged debts seem very appealing indeed.
If you have outstanding debts owed to you from August 2009 or later, or from before that time that have been acknowledged in the past six years, we may be able to help you recover what you are owed plus interest.
If you would like to talk to a member of our team please don’t hesitate to call 0808 252 5993.