The base rate is the Bank of England’s official borrowing rate. In other words, it’s the interest rate that banks and lenders have to pay when they borrow from the Bank of England.
This is the most important interest rate in the UK, as it generally influences most interest rates in the country. For example, if you have a tracker, standard variable rate or discount variable rate mortgage, the interest rates you pay will go up or down roughly in line with the Bank of England’s base rate (although the rate you’re paying will generally be higher).
The only exception is a fixed-rate mortgage, where the interest rates you pay are fixed at a certain figure for a set period (usually 2 or 5 years).
You may also hear the base rate referred to as the ‘interest rate,’ the ‘bank rate’ or the ‘Bank of England base rate.’
Thanks to the Coronavirus pandemic, the Bank of England’s base rate is currently at a historic low. This means that if you take out a fixed-rate mortgage now, you’ll be able to freeze your monthly repayments so that you’re still paying the same interest rates even when they inevitably go back up.