Glossary

Base rate

Base rate is the headline interest rate set by the Bank of England, which influences the cost of borrowing across the economy, including business finance.

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Bank of EnglandWho sets it

BenchmarkInfluences borrowing cost

Definition

The base rate is the interest rate the Bank of England charges commercial banks, reviewed by its Monetary Policy Committee. It acts as a benchmark: when it moves, the cost of money across the economy tends to move with it, including the rates lenders offer businesses.

In plain terms

Think of it as the wholesale price of money. Borrowing costs are usually built on top of it, so a higher base rate generally means dearer finance and a lower one means cheaper. Some business facilities are priced at a margin over base — see variable rate — while others are fixed, so the base rate matters less once you have agreed terms. To compare the real cost of an offer whatever the base rate, use the true cost of borrowing calculator.