Bank of England base rate

The base rate is the rate that the Bank of England (BoE) charges when it lends money to individual banks. It’s often used as a reference when banks set rates on their savings products for customers, which will usually move in line with it.

This could be seen in early 2023 - the BoE raised interest rates from 3.50% to 5.25% and savings rates subsequently rose across the market over the following months.

Source: Bank of England 07 January 2024

What is a savings rate and why do banks need savings?

Banks and building societies make their money by taking savings deposits and lending them out at a higher rate than they pay savers. The difference is called a ‘net interest margin’. The amount of money they need to bring in from savers is therefore dependent on the amount they are able and happy to lend. They don’t need an endless supply of money.

A savings interest rate can be thought of as the price a bank or building society needs to pay to attract the amount of money they need. Rates will therefore rise and fall in line with how much money they need to bring in to fund their lending activities.

Where can banks go to get this money?

Savers are just one place banks can go to get this money. Unlike building societies they can also borrow it from the BoE. If the BoE is lending money to banks at a low rate, there will be less incentive for the individual banks to offer higher rates to savers. Borrowing money from the BoE may also be easier than administering thousands or even millions of savings accounts.

Which banks have the best savings rates?

You’ll rarely see big high street banks offering the best savings rates. They benefit from having established relationships with millions of customers, who are often happy to save with the same bank they have their current account with.

Instead you’ll often find smaller ‘challenger’ banks and building societies offering the best interest rates. They don’t benefit from having a large brand or established relationships with a big customer base, so they need to offer headline rates to bring money in.

Sharia-compliant banks also tend to offer higher rates. They don’t pay an interest rate, but instead offer an expected profit rate, in line with Islamic banking principles.

More about Sharia savings products

Sign up to Active Savings alerts

Please correct the following errors before you continue:

Existing client? Please log in to your account to automatically fill in the details below.

Title:

Please select... Mr Mrs Miss Ms Mx Dr Sir Rev

First name:

Last name:

Email address:

Main phone number: (optional)

Mobile phone number: (optional)

Date of birth: (optional)

01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

Title:

First name:

Last name:

Address:

Email address:

Where did you hear about us?

Please select... Advert in the press Advert on another website Existing client HL mention on another website HL mention in the media Recommendation from a friend Search Engine / Research Mobile application

Hargreaves Lansdown would like to contact you about the services we offer which may be of interest to you. We explain how we use your personal data in our Privacy Policy.

If you would rather not hear from us, please tick the relevant box(es) below:

Email - no thanks, please don't contact me via email

Post - no thanks, please don't contact me via post

Phone - no thanks, please don't contact me via phone

Register

This site is protected by reCAPTCHA and the Google Privacy Policy and Terms of Service apply.

Your postcode ends:

This is my postcode

Not your postcode? Enter your full address.

Hargreaves Lansdown PLC group companies will usually send you further information by post and/or email about our products and services. If you would prefer not to receive this, please do let us know. We will not sell or trade your personal data.

This website is issued by Hargreaves Lansdown Asset Management Limited (company number 1896481), which is authorised and regulated by the Financial Conduct Authority with firm reference 115248.

The Active Savings service is provided by Hargreaves Lansdown Savings Limited (company number 8355960). Hargreaves Lansdown Savings Limited is authorised and regulated by the Financial Conduct Authority (firm reference number 915119). Hargreaves Lansdown Savings Limited is authorised by the Financial Conduct Authority under the Electronic Money Regulations 2011 with firm reference 901007 for the issuing of electronic money. Hargreaves Lansdown Asset Management Limited and Hargreaves Lansdown Savings Limited are subsidiaries of Hargreaves Lansdown plc (company number 212214).