Why the effect of the Bank or England base rate your mortgage if the BOE does not borrow money from banks?

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According to the latest news, I discovered that the Bank of England lends money only as a lender of “last resort. If the jury did not regularly borrow money from banks (and not by my mortgage BOE) Why is the BOE base rate have a direct impact on my mortgage?

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  1. Reply
    JQT
    April 30, 2011 at 12:49 am

    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.

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