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- Confused about the base rate? Don’t worry you aren’t alone. We asked the good people of Leeds about it.
- What do you know about the Bank of England base rate?
- Public responses:
- Nothing at all.
- Not the foggiest, not a clue.
- I don’t know.
- I know that it affects mortgages and savings and that it can fluctuate.
- I think it’s set by a committee.
- Other institutions set their lending rates based on that rate.
- The base rate is the interest rate at which the Bank of England (BoE) lends money to other banks. If the BoE base rate changes, banks might change the interest rates on mortgage and savings accounts. As a result, your mortgage and savings rates may go up or down in line with the change.
- What’s the highest the base rate has ever been?
- Public responses:
- Maybe at a guess five or six percent?
- No idea…ten … fifteen?
- Is it five percent?
- Maybe around four percent?
- In 1989 probably around 15 percent.
- Highest it’s ever been? I’ll guess 17 percent.
- In 1979, the base rate was a whopping 17%. Ouch!
- Thanks Leeds, you were awesome.
The Bank of England base rate. What's that all about then?
How does it affect your mortgage or savings? And should you take action if it changes?
Well, this page will help clear a few things up. If you watch our short video, you will discover that not much is known about the base rate. So, we've put a few things that you might want to know about it all in one place. We've provided some useful base rate FAQs and a brief history of the base rate below.
We've also provided a calculator that will help you see the impact a change in interest rates could have on your monthly mortgage payments.
This is the interest rate the Bank of England charges on money lent to financial institutions. The Bank of England’s Monetary Policy Committee generally meets once a month to decide whether this rate should change.
Any change in the base rate can influence the rates of existing or new products which are available through financial institutions, including first direct. This is because the cost of providing some products is directly linked to the base rate.
Not all mortgage rates are impacted by a change to the base rate. The rate of interest charged on our Tracker products will, however, decrease or increase in line with any change in the base rate and this will affect the amount of interest you pay on your mortgage.
If you are on a fixed rate, this won’t be affected until the end of the fixed rate period when your mortgage will move to our Standard Variable Rate (unless you have arranged to change to a different product). You can contact us up to six months before the end of your fixed rate period to discuss your options, and we’ll remind you in writing three months before it ends too.
Customers who opened a first direct Offset Mortgage before 1 January 2005 and took any further Offset Mortgage Additional Borrowing prior to 11 May 2009 received a guarantee that their Standard Variable Rate (SVR) would not rise more than 1% above the Bank of England base rate for the life of the loan.
If you’re on our interest rate guarantee you’ll see your rates change to 1% above the new base rate by the day following the Bank of England’s announcement.
We will write to all our impacted mortgage customers to confirm how the change affects you and what, if anything, you need to do.
As mortgage interest is calculated daily, tracker rates will change from the day following the base rate change announcement; this will be reflected in the next payment taken following the change providing the customer's payment hasn't already been pre-notified on the system. If this is the case it will take effect from the subsequent payment.
first direct’s Standard Variable rate is not directly linked to base rate. We regularly review our rates however and any impacted customers will be notified in advance of a change to the rate.
first direct doesn’t currently offer savings accounts which are directly linked to the Bank of England base rate.
You won’t see an immediate change to the rate of interest on your savings or investments. However, we regularly review the interest rates on our accounts and should there be a change, we’ll give customers 2 months’ notice before any changes are made.
We constantly review all of our products; we’ll notify you of any changes that may impact you.