By Islam El-Sakka
Policymakers at the Bank of England are expected to raise interest rates on Thursday, marking the first increase in more than three years. Most analysts predict a rise from 3.75% to 4%, which would increase borrowing costs for individuals and businesses while boosting returns for savers.
Inflation drives decision
Rising inflation, driven primarily by petrol and diesel costs, is pushing the Monetary Policy Committee toward a hike. 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. The ongoing impact of the Iran war on energy prices has filtered through to UK inflation.
Impact on borrowers and savers
The Bank last raised rates in August 2023. A 0.25 percentage point increase would immediately affect 510,000 tracker mortgage holders, adding about £31 to monthly repayments on a typical loan. Variable-rate mortgage holders, numbering 470,000, would see a £14 monthly increase once lenders adjust. Fixed-rate borrowers are not immediately affected, but new deals already reflect the expected rise; average two-year fixed rates stood at 5.96% and five-year rates at 5.99% in early November. Savers could see improved interest rates on deposits.
Analysts weigh outlook
Chris Cheverall of CMC Markets said the decision is less about reaching 4% and more about what follows, noting the Bank must balance high inflation against weakening growth. Rachel Springall of Moneyfacts warned that borrowers must be confident they can stomach future rises.
