UK interest rates live: Bank of England confirms hike to 4% in first rise since 2023

Nathan Emerson, CEO at Propertymark: “While these decisions are never straightforward, the Bank of England must carefully balance the need to control inflation against the wider impact that borrowing costs can have on households.

“Last week’s Autumn Budget acknowledged several important consumer concerns, including rising energy costs and the ongoing challenges facing many first-time buyers.

“Measures aimed at addressing some of these pressures are focused on stability, particularly where they could help improve access to homeownership and ease the long-term financial burden on households. Over the coming months, much will depend on how inflation and consumer confidence evolve.”

Our Business and Money Editor writes:

The hike is as expected – but the margin of agreement is even bigger than anticipated.

A vote of 8-1 clearly signals this was a required step from the BoE, but the single vote wasn’t for a hold, it was for a double bump, straight up to 4.25 per cent.

The committee are keeping the wording in place for taking each vote as it comes and not pre-empting future rate rises, and added there “remains limited evidence of knock-on effects on other prices and wages” from inflation caused by the Iran war.

Rate-setters tightened monetary policy in a bid to tackle rising inflation in the UK economy. This is the first time that the central bank increases borrowing costs since August 2023.

Britain’s midcap FTSE 250 index hit a record high ‌and the blue-chip FTSE 100 rose to a near three-month peak on Thursday, boosted by bank stocks ahead of the Bank of England’s policy decision.

It comes as the Bank of England ⁠is widely expected to deliver a 25-basis-point hike later today, its first rate ​increase in three years, as inflation pressures linked to the US-Israeli war on Iran mount

Ben Nichols, CEO of RAW Capital Partners has said there will not be be a direct and immediate reaction on mortgage rates from a hike today.

“This was widely expected. Inflation is creeping ever higher, driven largely by energy prices and the conflict in the Middle East, and there is still some volatility in the bond market, so the Bank had to act. But there is no need to blow this base rate hike out of proportion; lenders priced this in many weeks ago, so today’s decision will not necessarily translate into any further upward movement in fixed-term rates.

“More positively, the longer-term economic outlook seems to have improved slightly, and with the Budget having come and gone, there is a little more stability across the property and mortgage markets. This ought to provide greater certainty, allowing borrowers to move ahead with a little more confidence. As lenders, we have to be ready to respond in kind, supporting brokers and borrowers through pragmatism, flexibility and, when necessary, speed.”

Another vote to hold would be nothing short of shocking today, so beyond the actual lifting of the Bank Rate to four per cent, there are a few things we need to watch out for.

Firstly will be the vote numbers.

Analysts have been split over the past few weeks, on whether we’d get a 6-3 or a 7-2 – but more seem to be leaning towards the latter.

The tone around the votes, the reasons laid out by the MPC members, will be just as key: it won’t just be about why they are raising them today, but about the risks they see in the coming months regarding inflation and the wider economy.

Today’s outcome won’t just shape a hiked base rate, it will also impact the pound and the bond markets.

Households in Britain are bracing themselves as the Bank of England is looking set to raise interest rates – and it will mean millions of households face higher mortgage costs next year.

The Monetary Policy Committee (MPC) meet to vote on Thursday, with analysts widely set on expecting a hike from 3.75 per cent to 4 per cent – the first time the Bank would have raised rates in more than three years.

And with 2.3m households in the UK set for a mortgage renewal across the course of 2027 – nearly half a million homes more than did so this year – it will mean a particularly big jump for those who secured five-year fixes in the first half of 2022, just as interest rates started to run higher in the wake of Russia’s invasion of Ukraine.

Jinesh Vohra, chief executive officer of free mortgage app Sprive, said: “With the Bank of England widely expected to raise the base rate, homeowners face the prospect of another increase in borrowing costs at a time when household budgets are already under pressure. This will be particularly unwelcome for the millions facing the end of a fixed-rate deal over the coming year, who could find themselves refinancing onto significantly more expensive mortgages.

“While lenders are competing hard for business, homeowners shouldn’t assume that competition alone will protect them from higher mortgage costs. Those coming to the end of a fixed deal need to start reviewing their options early, rather than leaving it until the last minute and risking being pushed onto a more expensive rate.

“It’s also a reminder that homeowners need to look at what they can control. Overpaying, even by relatively small amounts, can reduce the outstanding mortgage balance and the interest paid over the life of the loan. For households already feeling the squeeze, finding extra money each month isn’t always realistic. That’s why using cashback from everyday shopping to make additional mortgage payments can be a useful way to chip away at the balance without putting further pressure on monthly budgets.

“Homeowners can’t control the Bank of England’s decisions or where mortgage rates go next, but they can take steps to make their mortgage more manageable. The sooner they start, the more they could save over time.”

Alexander Harvey, UK economist for Oxford Economics, said a November rate hike looks to be a “done deal” for the committee, which will be responding to higher oil and gas prices.

“So far, two factors have been central to the MPC’s decision-making since the outbreak of the conflict in the Middle East: the scale and duration of the energy price shock, plus the extent of any second-round inflation effects from elevated energy prices,” he said.

“These factors will continue to dominate the outlook for Bank rate.”

He said the key thing economists will be looking out for is any signal from the Bank as to where interest rates could go from here, with the financial markets expecting further hikes into 2027.

Commenting on the expected interest rates hike, Ellie Henderson, an analyst for Investec, said: “We imagine that many committee members’ patience with the recent rise in inflation has worn thin.

“The longer energy prices remain elevated, the greater the risk that a temporary price shock becomes more permanent; a ‘risk management’ hike could guard against this.”

She cautioned that producers might “not be willing or able to shoulder the burden of higher energy prices for much longer” and that this could push up prices in shops.