Finance glossary
Base Rate
Also known as: Bank Rate, Bank of England base rate
In simple terms
The base rate is the official interest rate set by the Bank of England. It influences the rates banks charge on borrowing and pay on savings across the whole economy.
On this page
What does base rate mean?
The base rate — officially called Bank Rate — is the interest rate the Bank of England pays to commercial banks that hold money with it. It is set by the Bank’s Monetary Policy Committee, which meets several times a year.
It is the single most important interest rate in the UK, because it feeds through into the rates banks and building societies set for their own customers.
How the base rate works
The Bank of England uses the base rate to help keep inflation at its 2% target. Raising the rate makes borrowing dearer and saving more rewarding, which tends to cool spending and inflation; cutting it does the opposite.
When the base rate changes, lenders usually adjust their variable mortgage, loan and savings rates in response — though not always immediately, fully, or by the same amount.
How could this affect me?
If you have a tracker mortgage or a variable-rate loan, a rise in the base rate typically increases your payments, while a cut reduces them. Fixed-rate deals are shielded until they end and you remortgage.
Savers usually benefit from a higher base rate, as variable savings rates tend to rise — though providers often pass on increases more slowly than they pass on cuts.
Things to watch out for
- Lenders do not have to pass base-rate changes on in full, or straight away.
- Savings rates often rise more slowly after a base-rate increase than borrowing rates do.
- A fixed-rate deal will not change with the base rate until it ends.
- The base rate can move in either direction — budget for your payments going up as well as down.
General information, not personal advice
Consumer Credit is an independent information service. We do not provide regulated financial advice or sell financial products. For advice on your own situation, speak to an appropriately authorised firm or a free service such as MoneyHelper. About Consumer Credit.
Sources
We checked this page against these official and authoritative sources.
- Bank of England, Interest rates and Bank Rate (opens in a new tab). Accessed 22 Aug 2026.
- MoneyHelper, How the Bank of England base rate affects you (opens in a new tab). Accessed 22 Aug 2026.