Loans: base rate at lowest level since 1955

13 November 2008

Last Thursday’s 1.5% base rate cut was a good sign for borrowers and would-be borrowers alike.

Taking the base rate down from 4.5% to 3%, the cut means the base rate is now at its lowest level since 1955.

However, any fall in the Bank’s base rate doesn’t necessarily translate into cheaper loans for the public. Loans and mortgages – apart from tracker deals – aren’t actually linked directly to the base rate, but depend on the LIBOR (London Interbank Offered Rate), the average rate at which lenders lend to each other.

Even so, the cut could be seen as a good sign for people looking for a loan, as it does mean banks can borrow more cheaply from the Bank of England. As the Bank’s website puts it: ‘The Bank implements its interest rate decisions through its financial market operations – it sets the interest rate at which the Bank lends to banks and other financial institutions.’

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