Types
of Interest Rates:
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Bank Rates
 Interest
rates offered by banks for lending and borrowing are all
based on the current Bank of England base rate. In the case
of loans, the bank’s margin for profit is taken from
the difference between the base rate and the particular rates
that they charge their customers.
Observing how banks actually
keep up (or not) with changes in the base rate usually
reveals that while banks tend to adjust
their rates quickly when the base rate goes up, their responsiveness
to a decreasing base rate is usually much slower. In other
words, you will probably notice the amount of your loan payments
increasing from time to time (as a result of variable interest
charges) more often than you will see the amount go down.
If
you are planning to take out a loan for a large amount
(especially in the case of mortgages and car loans), you
should find out
the bank’s policy regarding how it handles changes
in the base rate. |
