Banks decide the rates of interest that they will pay on deposits and the rates of interest they will charge their borrowers on the basis of the prevailing interest rate which is in turn decided by the Bank of England.
The Bank's Monetary Policy Committee meets once a month to set the official rate at which it provides funds to the banking system. The High Street banks and Building Societies follow the Bank's lead to set their base rates, so in effect what the Bank does has a direct bearing on what the borrower pays and what the saver receives.
- Government and local authorities might be able to borrow money at 0.5 per cent above base rate
- Blue chip companies with AAA credit ratings might be able to borrow at 1 per cent above base rate
- Ordinary members of the public and smaller companies might be able to borrow at 5 or 6 per cent above
