Financial Terms Glossary

Base Rate

Formal

A 'basic' rate of interest used by banks for setting the charge structure for customers with overdrafts and loans. Actual charges are usually higher than this base depending upon amount involved and risk profile.

Informal

Banks make money out of borrowing at x% and lending at > x%. This rate is the 'base' or 'foundation' rate for lending to their customers. The actual rate charged will be much higher depending on the financial strength of the customer and what the money is to be used for. This certainly increases bank profitability.

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