Base Rate
Co-Founder•1 min read
The base rate is the official interest rate set by a central bank — in the UK, this is the Bank of England Base Rate — and it serves as the benchmark for borrowing and lending costs across the economy.
It influences the rates that banks and lenders charge on loans, mortgages, and credit cards, as well as the returns paid on savings. When the base rate rises, borrowing becomes more expensive and saving more rewarding; when it falls, borrowing costs drop to stimulate spending and investment.
Example:
If the Bank of England raises the base rate from 5.0% to 5.25%, commercial banks may increase their business loan and mortgage rates accordingly.
Used in:
Monetary policy, lending products, savings rates, and economic forecasting.