In the UK, the benchmark interest rate is set by the Monetary Policy Committee (MPC) of the Bank of England.
Under the recent impact of the global financial crisis, the UK base interest rate fell to its lowest level for over 300 years.
Source: Bank of England – 300-year History
Negative interest rates
The Bank of England policymakers recently said that the domestic economic data was slightly stronger than expected in August of 2020. However, the UK economy is in a state of profound uncertainty due to the coronavirus pandemic with the aggravating factor of Brexit. All this means we are open to negative interest rates and even more QE.
Which means instead of earning interest on the money in our bank accounts, we will have to pay for our money to be in the bank, how times have changed!
Historic major Bank base rate shocks
Black Wednesday is a day many will remember well, September 1992 The UK’s withdrawal from the European Exchange Rate Mechanism (ERM) on 16th September 1992. This was the dreadful day when the base interest rate shot up from 10 per cent to 12% by 10.30 on the same day.
Following the global financial crisis in 2008, Bank of England gradually cut the base rate from 5.5% down to just 0.25% in August 2016 – historically, the lowest interest rate the UK has ever seen.
How does the base rate affect landlords?
This depends if the base rate is going up or down. As we know due to the ERM the interest rates shot up and this led to the property prices going down considerably. However generally on the flip side if the base rate goes down this tends to help the house prices and the economy as a whole.
What are negative interest rates?
A negative base rate means UK banks must pay to keep money on deposit, and it is designed to discourage them from doing this. Bank customers too must pay to hold a bank account, which most of us have experienced.
What is the Bank of England base rate?
The base rate is the interest rate that other high street banks and lenders pay when they borrow from the Bank of England.
When is the next Bank of England base rate meeting?
The (MPC) Monetary Policy Committee meets approximately every 6 weeks to discuss if the base rate should go up or down. Time of crisis they can meet sooner if required.
The most recent Bank of England base rate meeting was on 17th September.
The next meeting is scheduled for the 5th November 2020, and the last one of the years is on 17th December 2020.
When does the BoE base rate change?
The Bank of England can change the base rate if required at the Monetary Policy Committee (MPC) meetings.
It is difficult to predict precisely when the Bank of England will change the interest rate.
What is the current base rate?
The Bank of England base rate currently stands at 0.1%.
It dropped from 0.25% to 0.1% on 19th March 2020 to help control the economic shock of coronavirus. The bank of England reduced the base rate from 0.75% to 0.25% one week earlier on 11th March 2020.
How does the base rate affect mortgages?
The UK base rate impacts mortgage interest rates directly. They are essential for anyone who has a mortgage or thinking of getting one.
What Have Mortgage Interest Rates Been in the Past?
The Base Rates have not risen in 10 years due to the weakness in the global financial markets.
The highest the UK base rate has been was 17% in the late 70s when rising wages and oil prices were caused by a surge in inflation. However, the UK base rate, partly due to the ERM was also very high in the early 90s when it averaged around 15%.
Now the UK base rate sits at 0.01%
Will the base rate rise after Brexit?
This is an interesting question, no one knows, so many factors are at play at the same time. We have the uncertainty of COVID-19, which is likely to play some part in the UK base rate.
Source: British Landlords Association
Author:: Sarah Featherstone sarah@thebla.co.uk
Date: 10th of October 2020
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