Farmers with variable rate loans will incur higher repayments with immediate effect following the Bank of England’s decision to raise interest rates.

Base rate increased by 0.5% to a 14-year highpoint at 2.25% on 22 September, in an effort to curtail inflation within the UK.

Financial institutions operating in NI indicate that more than 90% of existing loans to farm businesses are structured on variable rate terms.

“Higher interest rates will also have a significant impact on the cost of working capital borrowed through overdraft facilities,” said Ulster Bank’s Cormac McKervey.

“Where farmers are making investments over the coming months, be that on stock or machinery, talk to your bank in advance, as other products may be a cheaper source of funds than using the overdraft,” he added.


Where any farmers are facing difficulty in meeting higher payments, the message from across the main banks is to approach them early to explore options. For those farmers in the process of undertaking a new loan, the latest rate rise is not a reason to stall an investment.

“Repayment capacity at higher borrowing rates is factored in to new loans at the outset. There have been some products removed from the market, but they relate to personal loans and fixed rate mortgages.

“Variable rate loans to fund business plans are still very much in place, but may cost more than initially projected,” commented a local agri manager.

Exchange rate

On the collapse in the value of Sterling against the US Dollar, and to a lesser extent the Euro, the expectation from the banks is that this will make grain, oil, energy and fertiliser more expensive to import. But the weak pound means there is potential to boost exports of agri-produce outside the UK.

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