The fast moving interest arena
The Big Interview with the Independent Finance Broker Team at Chandler & Co
Julie Hopkins of Buyacarehome (BACH) and Ownacarehome (OACH) interviews the Finance Brokers at independent care sector specialists, Chandler & Co. for their live comments about interest rates following the latest interest rate rise from the Bank of England.
On 4th August, the Bank of England increased Base Rate to 1.75%, reported to be the largest increase in 27 years, with inflation predicted to rise further. The increase in interest rates is seen as one of the strategies to tackle rising inflation and is a topic of growing interest in business boards across the care home sector.
JH (BACH & OACH): How does an increase in Base Rate affect the care home sector?
Brokers: Many borrowers have mortgages with variable interest rates that track Base Rate, the rate rise will likely impact repayments once their lender reflects the change. When, as now, we are in a fast-changing interest environment, it is a reminder that care home owners and businesses in the wider care sector should review their finances on a regular basis, look ahead to when their loans are due for renewal and review their mortgage options.
JH (BACH & OACH): Are interest rates changing rapidly?
Brokers: Lenders across the board are constantly monitoring the market and adjusting the interest rates they are able to offer, including both variable and fixed rate options. As brokers, we have daily access to mortgage lenders across the whole of market and this close relationship means that we can act quickly for providers, new and existing, seeking to optimise their financing options. Locking in a mortgage offer is fast moving and after 27 years of experience, we are well accustomed to supporting our clients through changing times.
JH (BACH & OACH): What should care home owners do if their current loan arrangements are due to expire?
Brokers: Book a consultation with a member of the broker team sooner rather than later. With interest rates moving at a faster pace now, being forewarned is forearmed.
JH (BACH & OACH): Will the amount care home owners can borrow change?
Brokers: Generally, care home valuations have stood up to the test of time, however, Loan to Values (LTV) can be constrained by debt service requirements. Lenders usually consider the affordability of businesses to service debt costs based on a longer-term assessment of interest rates, although each lender will review terms based on their own individual Credit team’s assumptions. We are familiar with the various calculations and know that it is crucial to correctly analyse the information and fairly reflect the business financials in the detailed proposals we prepare on behalf of our clients. We are currently seeing that terms with LTVs between 65% and 70% are more commonplace, however, we are able to access terms for our clients ahead of this level for proposals that carefully fit the right lenders’ criteria.
JH (BACH & OACH): How is the lending market reacting?
Brokers: With new and existing care home owners looking for discussions about next steps, we are engaging in more conversations around affordability alongside the current competitive buyers’ market. The mortgage market remains very active with focus around fixed rate deals, a typical term being two to five years, as buyers and investors react to a more volatile market.
Having an early conversation with a member of the Broker Team often offers peace of mind and sharpens acquisition plans. Staying informed about market conditions means operators can be confident they have access to optimal solutions for their care provision financing requirements.
JH (BACH & OACH): What is on the horizon for the care home market?
Brokers: The care home and wider care sector continues to be much sought after with the pandemic years highlighting the vital importance of the social care sector and an important partner to the NHS. We are continually receiving enquiries from individuals and organisations keen to invest and expand in the sector.
We see the care market continues to be driven by need from an increasingly ageing population with increasingly complex conditions, the home care market a natural progression to the care home sector as family and friends can no longer offer support. Obtaining the appropriate funding remains an important part of the sustainability of the care sector for the long term. Talking to a specialist broker with access to the wider lending market can help operators access bespoke financing solutions to support their plans.
If you are considering your current mortgage options, whether an existing term is due for renewal, you are acquiring a care home as your first or additional home, or seeking to extend/refurbish a current property, and would like to have an informal discussion around your finances, contact a member of the Chandler&Co specialist care sector finance brokers today for solutions on 01622 817484 or email: finance@chandlerandco.co.uk or get in touch on line and get a quote.
