Interest Rate Volatility Could Cost Hartlepool Council Hundreds of Thousands a Year

£82m in Loans and Rising: Hartlepool Council’s Borrowing Laid Bare

Council Debt Mountain now at Over £82m as Borrowing Pressures Mount

21st Jan 2026

Hartlepool Borough Council's been warned that changes in national interest rates could add hundreds of thousands of pounds a year to its finances, increasing pressure on already stretched local services.

The warning was set out in the council’s Treasury Management Strategy and Third Quarter Review for 2025/26, which is set to be presented to the Audit and Governance Committee next week. The report highlights the council’s growing exposure to interest rate movements as borrowing requirements rise and reserves reduce….

£262,000 impact from just a 1% rate change

According to the report, a 1% increase in interest rates would result in an estimated £262,000 increase in net borrowing costs to the council’s General Fund. Conversely, a 1% decrease would reduce costs by a similar amount.

Officers stressed that this figure relates only to borrowing that has not yet been fixed at long-term rates, meaning future borrowing decisions would play a critical role in determining how exposed the council becomes.

Borrowing pressures set to increase

Whilst its claimed Hartlepool Borough Council's not taken on any new borrowing during 2025/26, senior finance officers confirmed that this position cannot continue indefinitely. As the capital programme progresses and reserves are used to support day-to-day spending, the council expects to increase its reliance on borrowing in future years, this is despite claims Hartlepool Borough Council is set to benefit significantly from the governments new fair funding agreement.

Despite this, the report warns Hartlepool Borough Council may be forced to take out longer-term borrowing at much higher interest rates than originally anticipated, particularly if rates don't fall as forecast or if market conditions worsen.

Uncertain forecasts and global risk

Although current forecasts suggest that the Bank of England interest rates may gradually fall during 2026 and 2027, the council’s treasury advisers cautioned that predictions remain highly uncertain. Inflation trends, global economic instability, and geopolitical factors all said to be influencing borrowing costs.

Hartlepool Borough Council is currently sitting on long-term borrowing liabilities of approximately £82.6 million Pounds, This represents the council’s total outstanding external debt, made up of loans from the Public Works Loan Board (PWLB) and other market lenders. While the council’s overall borrowing requirement is higher, at around £129.7 million (Around 90% of its total operational revenues), the difference is currently being covered through a practice known as “under-borrowing”, where internal cash balances and reserves are used instead of taking out new loans. Officers have warned, however, that this position is temporary and that as reserves reduce and capital spending continues, the council will be required to increase its external borrowing, exposing it further to interest rate risk and rising debt costs..