velohead66

If the Bank Of England raises the base rate, *why/how/when* does a clearing bank like Barclays raise its rates.

ie - If BoE raises base rate 0.25%, will your floating mortgage also go up 0.25% the next day ??

How is this work please.

OllyK

I don't know if there are fixed rules on this. I used to seem to be raises went up the next day (but not all banks followed immediately, usually a few of the big boys would move first). Rate reductions seemed to wait till the end of the month, funny that

Brit_in_Japan

The government raises money by the issue of government bonds. The "interest" it pays is decided by the Bank of England. Since the Bank of England is regarded as the most secure way to earn money on investments, no-one would risk their money with a high street bank unless they paid a higher rate of return. Therefore when the Bank of England changes the base rate, all the other banks have to adjust the interest they pay on investments to make sure they continue to attract customers.

They use the money deposited with them to loan to others, such as for mortgages. The profits they make are based on receiving more money in interest on loans than they pay out in interest on savings/investments.

It's up to the banks when they change the interest rates after a base rate change based on financial factors, marketing factors etc

fast bloke

depends what sort of mortgage you have - a tracker rate will change immediately in line with BOE rates. A discounted rate will change when the lender changes their overall SVR. Might be the next day, might be the end of the month and it won't necessarily be the same amount as the BOE rate

Neil W

When is the next review scheduled? Is it rumoured to increase?

AC1

The Monetary Policy Committee meet at the first Wednesday of every month IIRC.

velohead66

I was wondering as the reserve bank (here = NZ) has just raised base rate(OCR actually) to 7.00% by 0.25%

We fixed our mortgage at 8.00% but the floating rate of 9.00% did NOT move after the rate increase. I guess it will in time, then ?

Brit_in_Japan

It's a commercial decision and can vary from bank to bank. Some banks may decide that they can absorb a 0.25% interest rate increase because they will lose too much loan business by increasing rates. Others will make a move straight away.

Banks have to notify customers of changes in interest rates and sending out tens of thousands of letters costs money. They also have to change all their marketing literature in all branches. So sometimes they wait to see if another interest rate increase (e.g. another 0.25%) and then they will make a single 0.5% increase.

My mortgage in the UK has it's rate changed just once a year. So it doesn't matter if the rate changes 5 times in a year, monthly morgage payments remain the same until the year end when a new rate is introduced to take into account all the previous rate changes.

Neil W

Would that be today then? Not seen any news on a review outcome.

fast bloke

They meet for two days, but usually discuss rates on Thurday morning and announce rates at 12.00 noon. Not always the first Wednesday and Thursday of the month though. 10th November and 8th December are the next two interest rate meeting

btw - Brit in Japan - they don't have to notify every customer any more. They just need to advertise change of SVR it in the national press.