Bank of England Base Rate Explained
The single most important number in UK personal finance, and most people can't tell you what it actually is. Nine people in a room set the price of every mortgage you'll ever take.
What a base rate move does to UK money
| Product | Pass-through | How fast |
|---|---|---|
| Tracker mortgage | Direct, base + margin | Immediate |
| Standard variable rate | Lender chooses | Up fast, down slow |
| Fixed mortgage | Via swap rates | At remortgage |
| Easy-access savings | Partial, slow | Weeks to months |
| Fixed-term savings | Near full | Days to weeks |
| Gilt yields | Tightly linked | Immediate |
Full effect of any base rate change works through the economy in 12 to 18 months.
Key takeaways
The Bank of England base rate is the interest rate the Bank pays commercial banks for reserves held with it. It sets the floor for every other rate in the UK economy.
Decisions are made by the nine-member Monetary Policy Committee, which meets eight times a year and votes openly. The Bank publishes both the decision and the voting split.
When the base rate moves, mortgages, savings accounts, business loans, gilts and even sterling all respond. The full effect on the real economy takes 12 to 18 months.
You do not need to predict rate moves. You need to understand the direction of travel so you can decide whether to fix a mortgage, lock in a savings deal, or extend bond duration.