Following recent news, I discovered that the Bank of England lends money only as the “lender of last resort”. If the BOE does not reguarly lend money to banks (i.e. my mortgage is not underwritten by BOE loans) why does BOE base rate have a direct effect on my mortgage?
1 Comment(s)
Because BOE base rate establishes the rate in which your bank will pay if they need the cash. In other words, BOE is the cost of money for your bank. Obviously, your bank has certain amount of risk when it lend money to customers, they will charge a bit more than their cost for taking the risk. So a borrower like you will pay a bit higher than BOE base rate.
Because BOE base rate establishes the rate in which your bank will pay if they need the cash. In other words, BOE is the cost of money for your bank. Obviously, your bank has certain amount of risk when it lend money to customers, they will charge a bit more than their cost for taking the risk. So a borrower like you will pay a bit higher than BOE base rate.
Best wishes.
JQT | Jun 14, 2009 | Reply