Interest rates rise to 4% as Bank of England battles inflation

First rate hike in over two years set to hit mortgage holders

The rate has gone up from 3.75%, with higher petrol and diesel prices making the decision widely expected. 

Around 510,000 people with tracker mortgages will feel the effect immediately, with typical monthly repayments set to increase by roughly £31, according to banking trade body UK Finance.

Another 470,000 homeowners with variable-rate mortgages could see their payments rise by around £14 a month once lenders adjust their rates. 

People on fixed deals will not face an immediate change, although anyone looking for a new mortgage will find that borrowing costs have already started to reflect the increase.

Moneyfacts said banks had "priced in" the expected decision when setting their latest fixed-rate offers. 

Its figures show that, on 4 November, the average two-year deal stood at 5.96%, compared with 5.99% for a five-year mortgage.

Fuel and energy bills add to UK inflation pressures

The Bank's decision comes as inflation continues to move further away from its 2% target. 

UK inflation climbed to 3.5% in September 2026, up from 3.1% the previous month, with higher fuel and energy prices linked partly to the Iran war contributing to the rise, according to the Bank of England.

The increase could offer some relief to savers if banks pass on the higher rate through better returns on savings accounts. 

However, attention will now turn to whether the Bank signals further increases or suggests that borrowing costs could stabilise.

The decision also adds to the financial pressure facing households ahead of winter. 

One UK council has confirmed plans for a 94% council tax increase, while rising energy bills have left customers looking for ways to cut their heating costs, including revisiting the question of whether keeping the heating on low all day is actually cheaper.