Policymakers at the Bank of England are expected to raise interest rates for the first time in over three years, with most analysts predicting an increase from 3.75% to 4% when the Monetary Policy Committee announces its decision on Thursday, November 5, 2026.
Bank Weighs Inflation Pressures
The Consumer Prices Index (CPI) inflation rate rose to 3.5% in the year to September 2026, climbing from 3.1% the previous month and sitting well above the central bank’s 2% target. Analysts point to the ongoing conflict between the US and Iran as a primary driver, keeping oil prices around $100 a barrel and natural gas prices at triple their pre-conflict levels.
The Bank rate has fallen from its 2023-24 peak of 5.25%, although the Bank’s Monetary Policy Committee has left the rate unchanged at its last six meetings.
Traders in the financial markets are widely expecting rates to increase to 4% from 3.75% when the Bank’s Monetary Policy Committee announces its next decision on Thursday November 5.
This would be the first time that the central bank increases borrowing costs since August 2023.
The conflict in the Middle East has helped push CPI further away from the Bank’s 2% target rate, with a surge in petrol and diesel prices a major driving force.
Borrowers Face Higher Rates
Financial information service Moneyfacts reported that the average two-year fixed residential mortgage rate stood at 5.96% as of November 4, while the average five-year rate reached 5.99%. Broker L&C noted that average rates from the 10 biggest lenders suggest borrowers rolling off five-year deals face paying nearly £5,000 more each year on a £200,000 mortgage over 25 years compared to those who secured remortgage deals in 2021, when the average five-year fixed rate among those lenders was 1.30%.
Analysts Assess Economic Resilience
The right choice ultimately depends on borrowers being confident they can stomach future rises. The devil is in the detail,
said Rachel Springall from Moneyfacts.
Earlier coverage: Bank of England Considers Raising Mortgage Cap to Five Times Income