Bank of England Raises Interest Rates to 4% for the First Time in Over Three Years

The Bank of England has raised interest rates to 4%, the first increase in the cost of borrowing in the United Kingdom in more than three years. The decision, announced on Thursday 5 November 2026, ends a long run of the rate being held steady and signals that the Bank is worried about rising prices.

The Bank’s Monetary Policy Committee voted 8–1 to lift Bank Rate by a quarter of a percentage point, from 3.75% to 4%. It is the first rise since August 2023, and it comes after six meetings in a row at which the rate was left unchanged. The Bank also warned that at least one more increase is likely if the war between the United States, Israel and Iran continues to push energy prices up.

For millions of households, the decision has a direct effect. People with tracker mortgages will see their monthly payments rise almost straight away. Savers, on the other hand, may finally see slightly better returns on their money. Here is what happened, why the Bank acted, and what it means for your money.

What happened

The Bank of England’s nine-member Monetary Policy Committee, the group that sets interest rates in the UK, met earlier this week and announced its decision at noon on Thursday 5 November.

Eight of the nine members voted to raise Bank Rate by 0.25 percentage points to 4%. The one member who disagreed did not want to keep rates on hold. Catherine Mann, an external member of the committee, voted for a bigger increase of half a percentage point, which would have taken the rate to 4.25%.

Mann had said last month that the Bank had been slow to show markets it had a grip on inflation. In the minutes of the November meeting, she said she was concerned about “non-linear inflation risks” after consumer price inflation rose to 3.5% in September, which she saw as a possible trigger for a loss of confidence in the central bank.

The decision is a sharp change of direction. At the start of the year, two interest rate cuts in 2026 had been widely expected. Instead, the Bank has now raised rates. The Bank’s base rate climbed to 5.25% in August 2023 and stayed there until August 2024, when the Bank began cutting. A series of cuts brought the rate down, and it had been held at 3.75% for six meetings in a row before Thursday’s rise.

Why the Bank raised rates

The main reason is inflation. Inflation is the pace at which prices rise, and the Bank’s job is to keep it at or near 2%. Right now, it is well above that.

Consumer price inflation stood at 3.5% in the 12 months to September 2026, up from 3.1% in August and its highest level in 11 months. The Bank now expects inflation to reach around 5% in the middle of next year — more than double its target.

The biggest driver is energy. The war involving the United States, Israel and Iran has pushed up the price of oil and gas, and those higher energy costs are feeding into household bills and the cost of running businesses. The Bank said that while the direct effects of higher energy prices are clear, there is still limited evidence of knock-on effects on other prices and wages. Even so, it said the inflationary pressure already in the pipeline was “now sufficient to warrant an increase in Bank Rate”.

In plain terms, the Bank believes prices are rising fast enough, and for long enough, that it needs to act now rather than wait.

The Bank’s chief economist, Huw Pill, said raising Bank Rate by 25 basis points “represents a significant step towards attaining the monetary policy stance needed to address current threats to price stability, including those stemming from uncertainty surrounding events in the Middle East and their influence over energy prices in the medium term.”

Deputy Governor Clare Lombardelli added: “Current circumstances warrant a 25 basis point increase in Bank Rate at this meeting. In the absence of evidence of weaker inflation pressures, there is likely to be a case for a further increase in rates in the near term.”

The decision is also a blow for the new Prime Minister, Andy Burnham, who has sought to ease cost of living pressures. Higher interest rates make borrowing more expensive for households and businesses, which can slow spending — but that is exactly how the Bank tries to cool inflation.

What it means for your mortgage

Interest rates matter because they set the price of borrowing for millions of households. The Bank’s base rate is what it charges banks and building societies to borrow money, and that shapes what those lenders charge their customers for mortgages and loans, as well as what they pay savers.

Whether you feel the rise straight away depends on the type of mortgage you have.

Tracker mortgages: payments rise now

Around 510,000 borrowers have a deal that tracks the Bank rate directly, so a rise flows into their monthly bill almost immediately. According to calculations by UK Finance, a quarter-point increase would add roughly £31 a month to repayments on a typical loan.

Standard variable rate mortgages: it depends on your lender

A further 470,000 borrowers are on standard variable rates. These borrowers will have to wait to see whether their lender passes the rise on. If lenders do pass it on in full, a typical rise would be about £14 a month.

Some lenders have already moved. Nationwide, one of the UK’s biggest mortgage lenders, said its Standard Mortgage Rate will rise from 6.49% to 6.74% and its Base Mortgage Rate from 5.75% to 6% from 1 December 2026, while its tracker mortgage rates will rise in line with the base rate.

Fixed-rate mortgages: no change yet — but a sting later

The majority of mortgage customers will feel nothing at once. Some 87% of mortgage customers are on fixed-rate deals, so their payments stay the same until the deal ends. The catch is what comes next: most lenders have already factored a November rise into the rates they offer on new deals.

As of 3 November, the average two-year fixed mortgage rate stood at 5.97% and the average five-year rate at 5.99%, according to Moneyfacts. That means anyone coming off a cheap fixed deal faces a much higher rate when they remortgage.

That matters because about 800,000 fixed-rate mortgages priced at 3% or below are expected to expire each year on average until the end of 2027. For those households, the rise will arrive when their current deal ends, not today.

What it means for savers

The news is better for people with savings, although the improvement may be modest and slow.

When the base rate rises, banks can afford to pay savers more interest. Moneyfacts put the average easy-access savings rate at 2.56% on a balance of £10,000 as of 3 November, with easy-access cash ISAs at 2.77% and one-year fixed accounts at 4.47%. Those rates may edge up in the coming weeks as banks adjust to the new base rate, but banks are often quicker to raise borrowing costs than savings rates.

If you have savings in an easy-access account, it is worth checking whether your bank has improved its rate and comparing it with what other banks are offering. Moving savings to a better-paying account is one of the few ways households can benefit from a rate rise.

What happens next

The Bank has made it clear that this may not be the last rise. It warned that at least one more increase was likely if the US-Iran conflict continues, as it started on a path that its main peers have already embarked on.

The Bank’s own forecasts point the same way. In its November Monetary Policy Report, the Bank said the median of responses to its November Market Participants Survey expected Bank Rate to rise to 4% in November and to 4.25% in February, before falling back to 3.5% two and three years ahead.

The next decision is due on 17 December 2026, when the committee meets again. By then, the Bank will have fresh data on inflation, wages and the economy, as well as a clearer picture of how the conflict in the Middle East is affecting energy prices.

There was one brighter note in the Bank’s forecasts. It revised up its expectations for economic growth this year and next, to 1.6% and 1.3% respectively. That suggests the Bank does not expect the rate rise to push the economy into trouble, even as it tries to bring inflation down.

Why this rise is different

Interest rate rises are not unusual, but this one stands out for three reasons.

First, it ends a long period of cuts and holds. The last rise was in August 2023, more than three years ago. Since then, the direction of travel has been down or sideways. Thursday’s decision reverses that.

Second, the disagreement on the committee was unusual. Normally, when a central bank raises rates, the members who disagree want to keep rates unchanged. This time, the only dissenter wanted a bigger rise. That tells us the committee is more worried about inflation getting out of control than about the economy slowing down.

Third, the rise comes at a difficult moment. Energy prices are rising because of a war, not because the UK economy is overheating. Raising rates cannot make oil cheaper or end a conflict. It can only cool demand at home, which is a blunt tool for a problem that started overseas. That is why the Bank described its move as precautionary — a step to keep inflation expectations in check, rather than a sign that the economy is running too hot.

What to do now

If you have a mortgage, the first step is to check what type you have. If you are on a tracker or a standard variable rate, expect your monthly payment to rise and check your lender’s announcement. If you are on a fixed rate, note when your deal ends and start looking at what rates are available a few months before it expires.

If you have savings, check your current rate. Easy-access accounts and cash ISAs may improve slightly, and one-year fixed accounts already pay more than 4% on average. Moving savings is often quick and free.

If you are thinking about borrowing, for example for a loan or a credit card, remember that higher base rates usually mean higher borrowing costs. Shopping around and paying down expensive debt matters more when rates are rising.

Frequently asked questions

What is the Bank of England base rate?

The base rate, also called Bank Rate, is the interest rate the Bank of England charges banks and building societies when they borrow money. It influences what lenders charge customers for mortgages and loans, and what they pay savers. It is reviewed eight times a year by the Monetary Policy Committee.

How much did interest rates rise?

Bank Rate rose by 0.25 percentage points, from 3.75% to 4%, on Thursday 5 November 2026. It is the first increase since August 2023.

Why did the Bank of England raise rates?

Inflation is too high. Consumer price inflation reached 3.5% in September 2026, and the Bank expects it to reach around 5% in the middle of next year, well above its 2% target. Rising energy prices linked to the US-Iran conflict are the main driver.

Will my mortgage payments go up?

It depends on your mortgage type. Tracker mortgages, held by around 510,000 borrowers, rise almost immediately — about £31 a month on a typical loan. Standard variable rate borrowers, around 470,000 people, will see a rise of about £14 a month if their lender passes it on. Fixed-rate borrowers, who make up 87% of mortgage customers, will not see a change until their deal ends.

Will savings rates improve?

Probably, but slowly. The average easy-access savings rate was 2.56% before the rise, according to Moneyfacts. Banks often pass rate rises on to borrowers faster than to savers, so it pays to compare accounts.

Will rates rise again?

Possibly. The Bank warned that at least one more increase is likely if the US-Iran conflict continues. Its next decision is due on 17 December 2026, and market surveys suggest another rise to 4.25% in February.

Conclusion

The Bank of England’s decision to raise interest rates to 4% marks a turning point. After three years of cuts and holds, borrowing is getting more expensive again, and the Bank is signalling that more rises could follow if the conflict in the Middle East keeps energy prices high.

For households, the effect depends on where they stand. Tracker mortgage holders will pay about £31 more a month. Savers may earn a little more. Fixed-rate borrowers can breathe for now, but around 800,000 cheap fixed deals a year are due to expire before the end of 2027, and the cost of the next deal will be higher.

The Bank’s message is clear: inflation is the priority, and it is prepared to keep raising rates until prices are back under control. The next test comes on 17 December, when the committee meets again.

Sources

• Reuters, “Bank of England raises rates for first time since 2023, says more may come”, 5 November 2026: https://www.businessday.co.za/world/europe/2026-11-05-bank-of-england-raises-rates-for-first-time-since-2023/
• Bank of England, “Monetary Policy Report — November 2026”: https://www.bankofengland.co.uk/monetary-policy-report/2026/november-2026
• BBC News, “What’s happening to UK interest rates and what does it mean for mortgages?”, 5 November 2026 (via World Right Now): https://worldrightnowlive.com/story/what-s-happening-to-uk-interest-rates-and-what-does-it-mean-for-mortga
• MoneySavingExpert, “Bank of England hikes base rate to 4% — here’s what it means for your mortgage, savings and more”, 5 November 2026: https://www.moneysavingexpert.com/news/2026/11/base-rate-rise/
• Nationwide, “Bank of England base rate changes”: https://www.nationwide.co.uk/mortgages/bank-of-england-base-rate-changes-and-your-mortgage

This article is for general information and education only. It is not legal or financial advice.