What Do Bank Of England Interest Rates Matter To Me?

If you don't own a home or have much in savings, they may not mean much.

For people who do own property or have substantial assets, interest rates can mean an awful lot.  And even for the unwealthy, they can have a big impact on your life.

Lending and savings rates in Britain are usually closely tied to the Bank of England (BoE) base rate (how much the BoE charges in interest when it loans money out to institutions like banks).  So the banks pass on any changes in interest rates when they loan money... and they pay a bit less than the BoE to individuals who by having a savings account or investment, are effectively loaning their money to somebody else.

The "cost of borrowing" also impacts investors, and profit margins.  The more expensive money is to get for investing, the less profit a company can make, the less it can pay its workers.  But if money is "too cheap", then inflation can run rampant, since everyone feels like they can pay a lot more for what they want.  The trick is to keep rates stable and inflation low but positive.