Bank of England hold leaves borrowers facing higher rates

• The Monetary Policy Committee voted 6–3 to keep Bank Rate at 3.75%; Megan Greene, Catherine Mann and Huw Pill wanted it raised to 4%.¹
• The Bank lifted its forecast for inflation to about 3¾% in the final quarter of 2026 and slightly above 4% in early 2027, largely because of higher oil, gas and refined fuel prices.¹
• Mortgage borrowers have already been hit: the Bank says two-year fixed mortgage rates are about 95 basis points higher than before the conflict, while major lenders raised fixed deals before Thursday’s decision.¹²
• Sterling slipped to just below $1.34, close to a two-month low, despite the Bank’s warning that rates may have to rise if the conflict drags on.³
• The Bank also committed to selling £20bn of gilts a year, alongside maturities, until its monetary-policy bond holdings are fully unwound by 2034.¹

The immediate relief from holding rates is therefore largely illusory for people refinancing. Fixed-rate mortgages are priced from swap rates and government-bond yields, not simply from today’s Bank Rate. Those market rates had risen sharply before the announcement, pushing the average two-year fix to about 5.67% and prompting roughly 25 lenders, including HSBC, Lloyds and Nationwide, to raise deals.²

The Bank is trying to wait for proof that the energy shock is spreading into wages and wider prices. But three members now want to move first, arguing that inflation could surge just as 2027 pay deals are set. That leaves households facing the worst of both choices: higher energy bills now, and the threat of higher borrowing costs later if the Middle East conflict remains unresolved.

• [Bank of England: September 2026 Monetary Policy Summary and minutes]¹
• [City A.M.: Mortgage rates at five-month high before the decision]²
• [Trading Economics: Sterling reaction to the Bank’s decision]³

Footnotes

1. https://www.bankofengland.co.uk/monetary-policy-summary-and-minutes/2026/september-2026 ↩ ↩² ↩³ ↩⁴ ↩⁵

2. https://www.cityam.com/mortgage-rates-at-five-month-high-ahead-of-bank-of-england-decision/ ↩ ↩² ↩³

3. https://tradingeconomics.com/united-kingdom/currency/news/584573 ↩ ↩²