Inflation is falling: Here's what 18 June means for your loan repayments

So, you have a loan from the tough years, an overdraft that never quite clears, and a big customer who pays when it suits them. 

Every quarter-point on the base rate lands on that overdraft and that repayment. It is the difference between a tight month and a comfortable one.

On 18 June, the Bank of England decides whether to move that rate. For thousands of our members, it is the number that matters most this month.

The rate has not moved all year. That may be about to change

The Bank's rate-setting committee meets eight times a year. It has held the base rate at 3.75% since January. At the last meeting, the vote was eight to one, with one member wanting a rise.

Then the picture turned. Inflation fell to 2.8% in the year to April, down from 3.3% the month before, and close to the Bank's 2% target. A few months ago, the fear was that prices would run away on higher energy costs. Now the question is whether the Bank makes a cut.

What a cut or a hold does to your money

Hold the rate, and your borrowing costs stay put. Cut it, and variable loans, overdrafts and commercial finance should ease over time, though banks rarely pass on the full cut, or pass it on quickly.

On a fixed deal, nothing changes until you refinance. On anything variable, this decision affects your repayments.

There is a second reason to watch it. When a customer pays late, you can charge statutory interest of 8% plus the base rate. The base rate sets the floor on what you are owed.

It matters in a market that is still hard work. In the latest ONS business survey, economic uncertainty was the top drag on turnover, with input prices still climbing, and cheaper borrowing would help.

Three things to do before the decision

You cannot control the rate. You can be ready for it.

• List every variable-rate facility you hold and work out what a quarter-point move does to your monthly outgoings

• Refinancing soon? Get your quotes in now, and read the Bank's language, not just the headline number. Its tone tends to flag the next move

• Check your invoice terms. With the base rate where it is, the statutory interest on late payments is a real lever, not a technicality

Enterprise Nation's view

Polly Dhaliwal, COO of Enterprise Nation, said:

"We do not tell the Bank how to set rates, and that independence is right. But we speak for the members who live with the outcome.

"For them, the cost of finance buys a van, makes room for a hire, or bridges the gap between winning an order and getting paid. Fairer, cheaper access to lending is a long-standing ask of ours, alongside the late payment reforms now going through Parliament."

The rate set on 18 June is part of the same picture.

We will cover the decision when it lands. For now, the move on inflation is the most encouraging sign in months.

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