Interest rate rise – no winners, no losers?

The latest indication on likely interest rate movements from George Carney, Governor of the Bank of England, should reassure both dentists looking to buy a practice and those seeking to sell. The Governor has indicated that rates are unlikely to rise much before 2017 and even then not above 2 per cent – lower than before the 2008 banking crisis.

Dentists borrowing money to purchase a practice usually have their interest rate linked to the Bank of England base rate, which is currently an historically low 0.5 per cent. So what difference would a 1.5 per cent rate rise make to the average borrower? A dentist borrowing £300,000 over a 20-year period might typically expect to pay finance costs of approximately £21,100pa, based on a lending rate of 3 per cent above the Bank of England base rate of 0.5 per cent. A 1.5 per cent rise in the base rate would increase their finance costs to approximately £23,000pa. Is this enough to put off prospective buyers? Probably not.

Practice owners should likewise be reassured that demand won’t be affected by a lack of finance-ready buyers should they decide to sell.

Martyn Bradshaw, an independent financial adviser and director of PFM Dental, says: "Most likely the knock-on effect of interest rate rises on the practice sales market will be minimal."

For more information contact pfmdental on 0845 241 4480 or visit www.pfmdental.co.uk