The current base rate set by the Bank of England is 4.75%. This rate was most recently adjusted following the Monetary Policy Committee meeting on 19 December 2024.
Understanding the Bank of England Base Rate
The base rate, also known as the Bank Rate, is the single most important interest rate in the UK. Set by the Bank of England's Monetary Policy Committee (MPC), it serves as the interest rate that the central bank charges other banks for lending them money. This rate significantly influences interest rates throughout the economy, affecting everything from mortgage payments to savings returns.
Key Details of the Current Base Rate:
| Aspect | Detail |
|---|---|
| Current Base Rate | 4.75% |
| Issuing Authority | Bank of England (BoE) |
| Most Recent Change Date | 19 December 2024 |
| Committee Responsible | Monetary Policy Committee (MPC) |
Impact of the Base Rate
Changes in the Bank of England's base rate have a widespread impact across the financial landscape. Here are some key areas affected:
- Mortgages:
- Variable-rate mortgages often see immediate changes in monthly repayments when the base rate shifts.
- Tracker mortgages are directly linked to the base rate, meaning their interest rates move in tandem.
- Fixed-rate mortgages are not directly affected during their fixed term, but new fixed rates offered by lenders are influenced by the base rate and market expectations.
- Savings: When the base rate increases, banks often raise the interest rates they offer on savings accounts, benefiting savers. Conversely, a decrease in the base rate may lead to lower returns on savings.
- Loans and Credit Cards: Interest rates on various loans, such as personal loans, car loans, and credit cards, are also influenced by the base rate. Higher base rates typically lead to higher borrowing costs.
- Economic Activity: The base rate is a crucial tool for the Bank of England to manage inflation.
- Higher rates can cool down an overheating economy by making borrowing more expensive, which discourages spending and investment.
- Lower rates can stimulate economic growth by making borrowing cheaper, encouraging spending and investment.
The Monetary Policy Committee reviews the base rate typically eight times a year, considering economic data such as inflation, employment, and overall economic growth to make their decisions.
