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Base rate
The interest rate that is used as a benchmark to set the interest rate for borrowers. A base rate is sometimes called an index rate. For example, if you obtain a one year adjustable rate mortgage, your loan rate will be reset once a year to a rate that equals the loan rate plus a margin. Interest rates on credit cards are frequently tied to a change in the prime rate, another popular base rate used in consumer lending.
Basis point
A basis point is 1/100 of a percentage point. Interest rates and bond yields are often stated in basis points. For example, if commercial banks raised their prime rate on loans by 25 basis points, it would mean they raised their prime lending by one-quarter of a percentage point.
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