Policymakers at the Bank of England are expected to raise interest rates on Thursday in what would be the first increase to the benchmark rate for more than three years, according to the BBC. Most analysts predict a rise from 3.75% to 4%, a move that would increase the cost of borrowing for individuals and businesses but boost savers.
The Bank rate has fallen from its 2023-24 peak of 5.25%, although the Bank's Monetary Policy Committee has left it unchanged at its last six meetings. Rising inflation, driven primarily by the cost of petrol and diesel, is expected to push policymakers into a hike. Inflation on the Consumer Prices Index was 3.5% in the year to September 2026, up from 3.1% the previous month and well above the central bank's 2% target.
Were the rate to rise, there would be an immediate impact on the 510,000 tracker mortgage-holders. A 0.25 percentage point rise would mean a £31 increase in monthly repayments for someone with a typical tracker home loan, according to banking trade body UK Finance. The 470,000 mortgage-holders on variable deals would typically see a £14 monthly increase once their lender responds.
On 4 November, the average two-year fixed residential mortgage rate was 5.96% and the average five-year rate 5.99%, according to Moneyfacts. Broker L&C said average rates from the 10 biggest lenders suggested some borrowers now faced paying almost £5,000 more each year on a £200,000 mortgage over 25 years than those who secured a remortgage deal in 2021. Savers, by contrast, could see better rates.