The Bank of England has raised interest rates for the first time in more than three years, lifting Bank Rate from 3.75% to 4% on Thursday 5 November as soaring energy costs push British inflation higher. The decision, announced at noon in London, ends a run of six consecutive holds and signals that borrowing costs may rise further if the conflict in the Middle East keeps energy prices elevated.
The Bank's nine-member Monetary Policy Committee (MPC) voted 8–1 for the quarter-point rise. All nine members backed an increase; the single dissenter, Catherine Mann, wanted a bigger half-point rise to 4.25%. It is the first increase in Bank Rate since August 2023, and the rate had stood at 3.75% since a cut in December 2025.
Why the Bank acted now
The reason, according to the Bank, is energy. The conflict in the Middle East is now in its ninth month, and global energy prices have continued to rise from an already elevated level. The Bank said Brent crude and UK gas futures had averaged 38% and 81% higher respectively than it assumed in July.
UK consumer price inflation rose to 3.5% in September, up from 3.1% in August and well above the Bank's 2% target. The Bank now expects inflation to climb to around 5% by the middle of 2027 — its central projection puts it at 4.9% in the second quarter of next year — before falling back towards the 2% target in the third quarter of 2028.
"There is now enough inflationary pressure in the pipeline caused by the rise in energy prices, that an increase in Bank Rate is warranted," Governor Andrew Bailey said in a statement after the decision.
The Bank stressed that the move was precautionary rather than a response to an overheating economy. It said there was still limited evidence that higher energy prices were feeding through into wider prices and wages, but that the pressure building in the pipeline was now sufficient to justify a rise.
Context: The Bank of England is catching up with its main peers. The US Federal Reserve and the European Central Bank have already lifted rates since the start of the Middle East conflict, and the Reserve Bank of Australia delivered its fifth increase of 2026 this week, according to Reuters.
A divided committee, united on direction
The vote was close to unanimous on the move itself, but the minutes show the committee is split on what comes next. Mann, who said last month that the Bank had been slow to reassure markets that it had a grip on inflation, said she was concerned about "non-linear inflation risks" — the danger that price rises accelerate suddenly rather than gradually.
Alan Taylor, who backed the quarter-point rise, framed his vote as insurance — a "one-for-now" hike — while the Bank said monetary policy was "not on a pre-set path" and that it would adjust Bank Rate as necessary to return inflation to target.
| Figure | Value | Source |
|---|---|---|
| Bank Rate | 4% (from 3.75%) | Bank of England |
| MPC vote | 8–1 (Mann wanted 4.25%) | Bank of England |
| UK CPI inflation, September 2026 | 3.5% (target: 2%) | Bank of England |
| Inflation forecast, mid-2027 | Around 5% (4.9% in Q2 2027) | Bank of England |
| GDP growth forecast | 1.6% in 2026, 1.3% in 2027 | Bank of England |
| Next MPC decision | 17 December 2026 | Bank of England |
The Bank's November Monetary Policy Report also raised its growth forecast slightly: it now expects the economy to grow by 1.6% this year and 1.3% next year, up from 1.1% previously forecast for 2027. Even so, it warned that activity was likely to weaken over the coming quarters.
What it means for households
Bank Rate is the rate the central bank charges other banks and lenders, so it feeds through to what borrowers pay and what savers earn. For the roughly one in three UK mortgage holders on a tracker or variable rate, the rise is likely to mean higher monthly payments. Savers, by contrast, may see slightly better returns, though banks are not obliged to pass the increase on in full.
The bigger pressure on household budgets is energy itself. The Bank's report projects energy bills rising to around £2,150 in the first quarter of 2027, up from £1,723 in the final quarter of this year. That squeeze is a political problem for new Prime Minister Andy Burnham, who has sought to ease cost-of-living pressures, Reuters reported.
What is not yet known: whether this is the start of a sustained tightening cycle or a one-off move. The Bank has deliberately kept its options open, and its own survey of market participants points to a further rise to 4.25% by February — but that is a survey expectation, not a Bank commitment.
What happens next
Reuters reported that the Bank warned at least one more increase was likely if the US-Iran conflict continues. Markets are pricing in another rise as early as February, with a second in the spring and a third before the end of next year, which would take Bank Rate to 4.75% by Christmas 2027, according to MoneySavingExpert.
Two things will shape the next decision, due on 17 December. The first is energy: the decision landed on the same day oil prices fell sharply after the US midterm elections, on hopes that the conflict in the Middle East might ease. If that fall holds, it could soften the very pressure the Bank cited. The second is whether higher energy costs start feeding into pay and other prices — the "knock-on effects" the Bank said it was watching closely.
The pound was little changed after the announcement, trading at $1.3471 at 12:14 p.m. London time, according to Yahoo Finance data cited by Reuters.
Frequently asked questions
Why did the Bank of England raise interest rates?
Because energy prices, pushed up by the conflict in the Middle East, are driving UK inflation higher. Inflation reached 3.5% in September and the Bank expects it to approach 5% by mid-2027, more than double its 2% target.
How much did rates rise, and who voted for it?
Bank Rate rose by 0.25 percentage points, from 3.75% to 4%. Eight of the nine MPC members backed the move; Catherine Mann wanted a larger 0.5-point rise to 4.25%. Nobody voted to hold or cut.
When was the last rate rise?
August 2023 — more than three years ago. The rate had been held at 3.75% since December 2025, with six consecutive holds before this decision.
Will rates rise again?
Possibly. The Bank said at least one more increase was likely if the Middle East conflict continues, and markets are pricing in a further rise by February. But the Bank stressed policy is "not on a pre-set path" — each decision depends on the data.
What does it mean for my mortgage?
Tracker and variable-rate mortgage holders are likely to see payments rise. Those on fixed-rate deals are unaffected until their deal ends. Savers may see slightly higher rates, though banks pass increases on at different speeds.
Key takeaways
- Bank Rate rose from 3.75% to 4% on 5 November 2026 — the first increase since August 2023.
- The MPC voted 8–1; all nine members backed a rise, with Catherine Mann wanting a bigger one to 4.25%.
- Inflation hit 3.5% in September and is forecast to reach around 5% by mid-2027, driven by energy prices from the Middle East conflict, now in its ninth month.
- Further rises are likely if the conflict continues, but the Bank says policy is not on a pre-set path.
- The next decision is on 17 December 2026.
What to watch next: the Bank's December decision, whether the post-midterm fall in oil prices lasts, and whether energy costs begin feeding into wages and other prices — the signal the Bank says will decide how far this tightening cycle goes.
