Understanding
the
BoE Base Rate
 The base rate is the rate of interest set
by the Bank of England. Specifically, this is the amount
of interest charged by the Bank of England to the money it
lends to major financial institutions. Once a month, a committee
assigned by the Bank of England reviews the base rate and
determines what adjustments need to be made based on the
country’s economic condition.
The basic rate of interest
on all loans is determined by the Bank of England’s
current base rate. This means that the base rate and the
UK economy are interdependent. They both
affect, and are affected, by each other. While the Bank of
England may not be able to control the entire aspect of the
country’s economy, it controls the base rate, and this
by itself grants it an important amount of leverage to help
keep the UK economy in as good shape as possible.
How this
affects your personal finances directly, however, can be
seen in the interest rates offered by banks for loans
and mortgages. Any rates of interest advertised by lenders
will be usually be a certain percentage above the current
base rate. If you have a loan taken out at a variable interest
rate,
your monthly repayments will also be subject to changes
in the base rate. |
