Base Rate
The Base Rate is the basis for most other mortgage and loan interest rates. It is set by the Bank of England according to economic conditions, in order to control the money supply and thus inflation.
The Bank reviews the base rate every month (or more often if the economy is especially volatile), and any changes made will quickly be reflected in the interest rates charged by banks and building societies for variable rate mortgages or other credit.
In times of high inflation, rising interest rates can cause severe problems for variable rate mortgage payers - some measure of protection against this can be found in fixed rate mortgages.
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