*Loan,banking and credit>>>bank of england

What exactly does the bank of england's interest rate mean?

It's 5.25%. But who recieves or pays that? why does it have an affect on my mortgage?

I think it is the rate that the Bank of England charges the big commercial banks to borrow money from it.

So if the BoE interest rate goes up and you have a variable rate mortgage then your bank is going to increase the rate it charges you.

If the economy is overheating (people running out and spending too much money, thus causing prices of goods and services to rise because there are so many customers) then the BoE increases its interest rate, so that you and me have less money in our pockets after we have paid our mortgages.

If the economy needs stimulating then the BoE cuts interest rates so that you and me have more money in our pockets to buy stuff, also so that businesses are encouraged to borrow money to invest in more productive machinery or employ more staff or whatever.

Something like that anyway. Source(s): Been reading The Economist magazine for about three years and some of it is starting to make sense...

Basically if you have a 拢100,000 mortgage and the intrest rates increased from 5.25% to 5.5% your mortgage repayments will go up by around 4.5% as this is the difference increase between the two percentages. So say you were paying back 拢400 a month you will now be paying back 拢418 a month for the same amount of time left to repay leaving you worse off. However if and when the intrest rates decreases you will see a pay drop.

If youre a saver however the intrest you recieve on your savings will increase by the percentage difference between the old and new interest rates
5.25% is what the Bank of England charges private banks to borrow money. If your bank can borrow the money for your mortgage at a low rate, they can charge you a lower rate and still make a profit. They could keep your mortgage rate high, but that would not be competitive and they would lose business to banks charging lower rates.
You don't really think your bank actually has a trillion in their vaults, do you?

Banks need to borrow money just like you.

The Bank of England lends money to them.