What difference does the Bank of England base rate make?

[james_tigerwoods]

I've done a search and not really found the answer to this question, but in all reality, what difference does the Bank of England base rate make anyway?

Even if it's lowered, the only time any difference is felt is if the inter-bank interest rate is changed. Or have I mis-read/heard all this?

Apologies for another money thread by the way....

[Roo.]

My mortgage is a BoE tracker so when the rate goes down so do my payments.

[Puggit]

Most banks set their rates on the Libor rate - so unless you have a BoE tracker, it doesn't necessarily make much difference.

[richardxjr]

Most (small) businessess borrow. We do and our customers (other SMEs)do. Whether that is overdraft, factoring, or invoice discounting much of that borrowing is based on BoE base rate. A decent interest rate cut will help a lot of SME's struggling out there, trying to avoid redundancies, MASSIVELY.

This is MUCH more important to the economy than an individual's mortgage tbh

(Copied from t'other thread)

[dienamic]

I have no savings, and a mortgage that tracks .36 below BoE base rate until it hits 3%, so to me at least, it makes a big difference.

[Simpo Two]

richardxjr said:

much of that borrowing is based on BoE base rate.

But aren't banks increasingly keeping the difference to recoup losses?

[scotal]

Simpo Two said:

richardxjr said:

much of that borrowing is based on BoE base rate.

But aren't banks increasingly keeping the difference to recoup losses?

For new lending they are, for existing lending, where the loan agreement tracks BoE base, they can't keep the rate the same when there is a drop.


ETA, oh and they are funding at Libor so while that remains decoupled from Base, they are not going to slash their margins.

Edited by scotal on Thursday 6th November 11:43

[GreigM]

Simpo Two said:

richardxjr said:

much of that borrowing is based on BoE base rate.

But aren't banks increasingly keeping the difference to recoup losses?

Yup in fact the scum that RBS are even increased their rate during the summer as the BoE lowered theirs.....

[a boardman]

my mortgage comes down £6 for every 0.5% drop.

[anonymous-user]

a boardman said:

my mortgage comes down £6 for every 0.5% drop.

Don't spend it all at once!

[richardxjr]

Simpo Two said:

richardxjr said:

much of that borrowing is based on BoE base rate.

But aren't banks increasingly keeping the difference to recoup losses?

No. My Invoice Discounting finance (and many others') as well as my mortgage is x% over BoE rate. The x% is a contractual percentage and can't suddenly change.