The base rate is the annual interest rate use by banks to calculate lending charges. The base rate is set by the Bank of England, following the recommendation of the Monetary Policy Committee, which is enacted by the Governor. This base rate – the rate at which the Bank of England charges other banks for secured overnight lending – does not dictate that the other banks follow the same exact rate or put the other banks under any obligation to follow the given rate. Despite being under no obligation, retail banks usually follow the lead of the Bank of England and use it as the minimum lending rate.
People looking for loans will do well to research on the current base rate because, as is already mentioned earlier, it represents the minimum interest rate possible for a loan. It is especially useful when finding out prevailing interest rates for mortgages. Sources for finding the current base rate include a number of print volume and websites. One of the easiest ways to finding previous and current base rates include going to the Bank of England’s web site.
Currently, the official name for the base rate is the official bank rate. It was previously called minimum lending rate, minimum band one dealing rate, and repo rate, which means repurchase agreement rate. The repo rate in India has a different function than the repo rate or base rate in the United Kingdom.
