The Base Rate

The Base Rate (often called the Bank Rate) is a rate set by the Bank of England's Monetary Policy Committee (MPC), which lenders and bank account providers will refer to when they're deciding how much interest to charge / pay on credit / savings.

This is particularly clear when it comes to mortgages - tracker mortgages in particular, as the rate on one of these mortgages will 'track' the Base Rate, following it as it goes up or down.

Back in 1979, the Base Rate reached 17%, but it hasn't been over 10% since May 1992. In fact, the Bank's MPC started a rapid series of reductions in the Base Rate in response to the onset of the financial crisis: between October 2008 and March 2009, it plummeted from 5% to its all-time low of 0.5%

Since then, this has had a massive effect on both savers and mortgage holders. Savers have lost out on billions in interest on their savings - but people with mortgages have saved billions.

Source: ThinkMoney.com

Similar Fund Terms: Interest Rate, Monetary Policy

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