–Base rate is pure interest plus expected inflation
•Rate at which people lend money at no risk
The lowest rate at which a bank will charge interest, also known as the repo rate The rate is set in the UK by the monetary policy committee of the Bank of England, with a view to controlling inflation over the medium-term. Banks usually charge interest at a stipulated figure 'above base rate', with the figure depending on all sorts of circumstances to do with the loan and the borrower. If the base rate rises, then usually the rate of interest charged on the loan will rise to preserve the differential. If it falls, so will the rate on the loan. Thus, a loan at '4% above base rate' will be 10% if the base rate is 6%, and will rise to 11% if the base rate rises to 7%.