UK interest rates raised to 4%

The Bank of England has lifted UK interest rates to 4%, the highest level in over 14 years as the economy continues to battle with inflation.

This is the 10th meeting in a row at which the Bank’s Monetary Policy Committee has voted to raise UK borrowing costs.

The increase from 3.5% puts more pressures on mortgage payers and businesses struggling to pay off their loans.

Paul Wilson, Chief Investment Officer at Channel Capital, said: “A decade of record-low interest rates was not economically healthy or sustainable. But moving from all-time lows to a 15-year high of 4% in the space of 14 months has inevitably created challenges for lenders and borrowers alike.

“For lenders, it has hindered their efforts to secure senior debt from banks and institutions, many of which are reticent to deploy capital in the current climate of changing rates. The shortage in senior debt – which is essential, given it makes up the majority of a lenders’ funding stack – is, in turn, preventing or limiting lenders from issuing loans to clients. It becomes a vicious circle.

“At times like these, other sources of capital become more important. Mezzanine finance is a prime example, and we’re seeing more lenders look to this option when building their funding stack. By securing mezzanine finance from more nimble, ambitious, or proactive investors, lenders are then able to provide much-needed confidence to the senior debt providers. As such, more must be done to champion the role of mezzanine finance in the current climate; it is keeping the lending industry active and is likely to remain in high demand over the months and years to come.”