Bank of England to raise rates to 4% — SkimNews
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- Bank of England is expected to raise its benchmark interest rate from 3.75% to 4% on Thursday, marking the first increase in over three years.
- Monetary Policy Committee has held the rate unchanged at 3.75% through its last six meetings despite inflation climbing to 3.5% in the year to September 2026, above the 2% target.
- Inflation, driven by rising petrol and diesel prices, has resumed an upward trend and is expected to go higher, influenced by the ongoing impact of the Iran war on energy markets.
- Tracker mortgage-holders — around 510,000 — would see immediate repayment increases, with a 0.25 percentage point rise adding £31 monthly on a typical loan.
- Savers could benefit from higher interest rates on deposits, as banks typically pass on increases following a Bank rate rise, though the extent depends on lender decisions.
- Fixed-rate mortgage borrowers are not immediately affected, but those nearing renewal face significantly higher costs, with average five-year rates now at 5.99% versus 1.30% five years ago.
Why it matters: A rate hike raises borrowing costs for hundreds of thousands on variable and tracker mortgages while offering relief to savers, all amid a weakened growth outlook and inflation still above target. The decision forces households to navigate a cost-of-living squeeze worsened by energy-driven price pressures, with some now reconsidering fixed-to-tracker switches despite future rate uncertainty.
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