Predicted hike in interest rate causes concern

Small businesses in and around Bournemouth will be adversely affected if there is another interest rate hike as forecasted by economists.

Global Insight chief UK and European economist Howard Archer has predicted another rise in interest rates owing it to Britain’s economic growth in recent times.

However, this is cause of concern for mortgage holders and small business owners all over the country and so much more in Bournemouth.

“Bournemouth attracts many small businessmen and being a tourist place this can adversely affect many,” says Mr. Timothy Bacon, owner of The Cuckoo Inn near the new forest area.

“It is a headache if it increases again,” he says adding that most people who hold mortgages and loans stop spending as much when interest rates go up which in turn has a toll on his business.

The Bank of England’s decision to increase interest rates by 0.25 per cent to 5.25 per cent earlier this month was a verdict that had investors smiling but most borrowers were unhappy.

Statistics reveal that the Gross Domestic Product (GDP) grew by an estimated 2.7 per cent last year after unexpected output during the last few months.

According to Mr. Archer this has given rise to inflation and this can be only curbed again with another interest-rate hike.

However, Mr. Bacon, who now owns four pubs in the area, says: “It is only in theory that interest rate hike curbs inflation. In real, it leads to a price hike and people’s spending power is less especially that of borrowers.”

Srikanth Ranganathan, who owns a news agency in Springbourne, Bournemouth says: “I have a loan from the bank as well and I can’t think of how to deal with another interest rate hike if it happens. I hope it won’t.”

On the other hand, Cheryl Laurie an employee at Llyods TSB in Bournemouth and a regular investor says: “I save regularly and my flat is rented not on a mortgage so it sounds good to me.”

While the very suggestion of another interest rate raise has aroused concern among people, an actual hike might even do worse as Mr. Bacon said, “I hope its one of those forecasts that doesn’t materialize."

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