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A
B
C
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Letter B
Base rate or Bank Base rate
The bank base rate was introduced by the banks following the abolition of
Minimum Lending Rate by Geoffrey Howe, the then Chancellor of the Exchequer, in
1981.
Bank Base rate is generally the rate that is used to calculate loans such as
commercial loans i.e. a percentage over bank base.
It is a common misconception that mortgage rates relate to the bank base rate
but this is not the case mortgage companies are aware of the movements of the
bank base rate but react to it in a far more lethargic way especially when it is
going down.
In addition there is normally a gap between bank base rate and mortgage rates,
the lower bank base goes the wider the gap between it and mortgage rates
generally is.
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