Bank of England increases base rate to 4% – what it means for your mortgage and savings

The base rate is used by the central bank to charge other banks and lenders when they borrow money – so it influences what borrowers pay and what savers earn.

It's also used by the Bank of England as a tool to control inflation (the rate at which prices rise). The Bank has a target – set by the Government – of 2% for the Consumer Prices Index (CPI) measure of inflation. The latest figures show that CPI inflation was 3.5% in the 12 months to September 2026 – up from August's figure of 3.1% and still above the Bank's target.

Why the base rate was increased

On Thursday 5 November, the Bank's Monetary Policy Committee (MPC), which determines the rate, voted eight to one to hike the base rate. One member voted to raise the rate to 4.25% instead.

The MPC said: "While the direct effects of higher energy prices are clear, and will continue to feed into firm and household energy bills, there remains limited evidence of knock-on effects on other prices and wages. However, the degree of inflationary pressure in the pipeline is now sufficient to warrant an increase in Bank Rate."

Nicholas Mendes, mortgage manager at John Charcol, said: "The Bank's decision to raise the Bank Rate by 0.25 percentage points to 4% was a precautionary move rather than a sign the economy was overheating. With inflation rising and expected to climb further early next year, the MPC chose to act before higher energy costs could feed into wages and wider prices."

Could the base rate rise again?

Sarah Coles, head of personal finance at AJ Bell, said: "This is very unlikely to be the last of the rises. The market is pricing in another rise as early as February next year, with a second in the spring and a third before the end of the year.

"At the moment, it's expecting us to reach Christmas 2027 with a rate of 4.75%. Of course, this isn't nailed on. Just a few weeks ago it was pricing in a rise to 5% by the end of 2027. An awful lot depends on what happens in the wider world, the impact on oil prices and developing inflation expectations."

Mr Mendes said: "Markets are pricing in further rises over the next year, but that looks too aggressive. Much of the rise in inflation is being driven by energy, and with pay growth slowing and the jobs market softer, there is little sign yet of the broader inflation that would justify a long series of increases.

"The next few months of inflation and wage data will be important. If inflation peaks early next year as expected and pay growth stays subdued, the pressure on the Bank to keep raising rates should ease, and markets may conclude they had priced in more increases than were needed. That would give borrowers more reason for optimism as 2027 progresses."

Watch: Martin explains why new fixed rates may get a little bit cheaper

• If you're already on a fix, there's no change until your fix ends. If that's within the next three to six months, you might want to search for a new mortgage now – and don't forget to check product transfer offers from your existing lender. In some cases you can even lock in a rate and ditch it later if cheaper deals emerge.

• But new fixed deals could get cheaper. MoneySavingExpert.com (MSE) founder Martin Lewis explained on his ITV The Martin Lewis Money Show Live on Tuesday 20 October why a base rate rise could potentially lead to fixed mortgage rates falling. Watch the full clip here:

From The Martin Lewis Money Show Live on Tuesday 20 October 2026, courtesy of ITV. All rights reserved. Watch the full episode on ITVX.

On a tracker or variable rate? Expect your payments to rise within weeks

We'll be asking all major lenders when they plan to increase their tracker and variable rates. We'll publish a lender-by-lender breakdown when we know more. But in the meantime...

• If you're on a tracker, your rate will rise by 0.25 percentage points. The increase is equivalent to roughly £15 a month more per £100,000 of mortgage debt.

• If you're on a variable rate, this will likely rise by up to 0.25 percentage points. It could be a bit less depending on the lender and the exact mortgage you have. If you're on a standard variable rate (SVR), which you roll on to when your fix ends, you should consider switching to a new deal now – see our Cheap mortgage finding guide.
  
  Standard variable rates (SVRs) are normally far more expensive than the best fixed or tracker deals – though right now, a typical SVR is currently around 4.9% to 6.9%, and the top two- and five-year fixes both start from around 4.9%.
  
  Ms Coles said: "The real pain will be reserved for people on variable rate deals, who will see rates move with the Bank of England. Some may have opted for a variable rate on the understanding it was always likely to rise, but they decided to take the risk in the hope it would be cheaper than a fixed rate overall. Others will be stuck on the standard variable rate and subject to a hike on an already hideous rate.
  
  "If you're stuck because your circumstances have changed and you're worried you won't pass affordability checks for a new deal, it's worth speaking to your existing lender which may allow a transfer. You might not get the best possible deal on the market, but it should at least be less painful than an SVR."

Where will mortgage rates go in future?

Aaron Strutt of mortgage broker Trinity Financial, said: "We have already seen lenders make significant changes to their mortgage pricing, and there could be further adjustments depending on how the markets react to the MPC's decision. Barclays, Nationwide, Santander and Halifax have just lowered their rates and there are still a fair few sub-5% fixes available now."

Ian Futcher, financial planner at Quilter: "This is clearly a period of higher interest rates once again, so consumers may be in for a prolonged period of elevated borrowing costs and thus need to make sure they shield themselves as best they can. The base rate sat at just 0.1% in 2021, so those moving off five-year fixes will need to consider their options carefully.

"Borrowers coming to the end of a fixed deal or looking to secure a new one should therefore consider securing a deal sooner rather than later. Many mortgage offers can be secured several months in advance, and you can usually switch to a cheaper option if one becomes available before completion."

Savings rates are expected to rise – but there's no need to wait

Since the last base rate announcement, when it was held at 3.75% in September, the top savings rates available on easy-access accounts have climbed slightly – you can now get 4.5%-plus with the top accounts.

However, it's still crucial to check your interest now. Millions are on pants rates and can easily and simply move their money to where it pays more. If you're on a fix, diarise to act before it ends.

Currently, the benchmark easy-access rate is 4.57% from Oxbury Bank – though it's possible to get up to 6% elsewhere.

If you're worried about rates dropping and can lock money away, you might want to consider a fixed deal. RCI Bank pays 5.3% for two years, while Afin Bank pays 5.4% for five years. Alternatively, if you want a shorter fix and prefer to save with a big name, MBNA (part of Lloyds) pays 5.1% for one year.

For full info and lots more options, see our Top savings accounts guide.