Bank of England expected to raise interest rates for first time in three years

The Bank’s Monetary Policy Committee (MPC) is set to lift the benchmark Bank Rate to 4 % on Thursday, a change that would be the first increase in more than three years. The decision will be announced at 12:00 GMT. Analysts across the press have converged on the same 0.25‑percentage‑point rise, citing the rise in consumer prices as the main driver.

In its latest statement, the BBC reported that the CPI measure of inflation was 3.5 % in the year to September 2026, up from 3.1 % the month before.

Media additions

The ongoing conflict in the Middle East – specifically the Iran war – has pushed up petrol and diesel prices, which in turn feed into the CPI. Ofgem’s energy price cap rose by 3.6 % on 1 October and is forecast to jump by 22 % in January, widening the inflation outlook. The BBC noted that millions of domestic energy customers are braced for a hefty rise in prices in the coming winter.

“The decision is increasingly less about whether rates reach 4% and more about what follows after that,”

Chris Cheverall, head of UK at trading platform CMC Markets, via BBC

Analysts from Investec and Oxford Economics see the rate hike as a “done deal.” They argue that prolonged energy price shocks risk becoming entrenched, creating a “second‑round” of inflation. The Mirror reported that the MPC will consider whether a risk‑management approach is required to guard against a permanent shift in energy costs.

“We imagine that many committee members’ patience with the recent rise in inflation has worn thin.”

Ellie Henderson, analyst, Investec, via The Mirror

“A November rate hike looks to be a ‘done deal’ for the committee, which will be responding to higher oil and gas prices.”

Alexander Harvey, UK economist, Oxford Economics, via The Mirror

The Bank’s move is part of a broader tightening trend in global central‑bank policy. The U.S. Federal Reserve raised rates last month for the first time in three years, and the Bank of England is following suit. The Economic Times tied the BoE’s decision to the “Iran war fuels inflation” narrative, underscoring the international dimension of the pressure.

For mortgage holders, the immediate impact is limited but the future is clear. The BBC highlighted that a 0.25‑percentage‑point rise would mean a £31 increase in monthly repayments for a typical tracker home loan, according to calculations by UK Finance. Variable‑rate borrowers, numbering 470,000, would need to wait for their lender’s reaction, with a similar £14 monthly increase expected once rates change. The average two‑year fixed residential mortgage rate was 5.96 %, while the average five‑year rate stood at 5.99 %. Broker L&C said that average mortgage rates offered by the 10 biggest lenders suggested some borrowers now faced paying almost £5,000 more each year in repayments on a £200,000 mortgage over 25 years than those who secured a remortgage deal in 2021.

On the savings side, the Bank’s own data – quoted by the BBC – suggests that the increased Bank Rate will trickle through to the rates offered on savings accounts, giving savers a modest boost. The Bank’s rate is what it charges other banks and building societies to borrow money, which in turn influences the rates they offer to their own customers for mortgages and savings.

“I think they will have pushed through with a hike,”

Hetal Mehta, chief economist at wealth managers St James's Place, via KLSE Screener

Other central banks have already increased their interest rates, including the U.S. Federal Reserve which did so last month for the first time in three years. The MPC will also take into account other economic indicators, including the fact that the UK’s unemployment rate fell to the lowest level in more than a year in the three months to August, to 4.7 percent, and that the economy unexpectedly grew in August by 0.1 percent, suggesting resilience in the UK despite pressure on consumer spending and wider volatility because of the Iran war.

What Happens Next?

• Financial markets are pricing in further hikes through 2027, as analysts suggest a continued tightening path.
• Savers should monitor their deposit rates for the expected uptick.

For households, the most immediate impact will be on the cost of borrowing. The Bank of England’s announcement underscores the delicate balance between curbing inflation and supporting growth. As the MPC moves forward, the focus will remain on energy‑driven price pressures and the resilience of the UK labour market.