The Bank of England has raised interest rates 0.25% from 3.75% to 4% in a widely expected move following the latest meeting of the Monetary Policy Committee (MPC).
The MPC voted to change the base rate for the first time since December 2025 when it was cut by 0.25% from 4.00% to 3.75%; and implement the first increase since August 2023 when base rate changed from 5% to 5.25%.
Commentators have expressed little surprise at the decision which comes following the latest inflation figures which showed Consumer Price Index (CPI) from the Office for National Statistics (ONS) was 3.75% in October driven largely by energy prices and the conflict in the Middle East.
According to Moneyfacts average mortgage rates have hit their highest levels since the end of 2023 with comparisons on two-year fixed rates across Barclays, HSBC, Lloyds Bank, NatWest and Santander showing interest rates are 0.44% higher on average versus the start of September.
Average new mortgage rates have hit a three-year high, rising to 5.89%, up from 5.83% at the start of October. The last time rates were this high was last in November 2023 at 6.07% added Moneyfacts.
Reaction and Commentary
Andrew Lloyd, Managing Director, Search Acumen: “For consumers already limping from years of higher bills, this rate rise is another boot landing. Around 1.8 million fixed-rate mortgages are due to expire in 2026, with a further 2.3 million households facing refinancing in 2027. That is a huge number of households potentially having to recalibrate their finances just as the cost of borrowing starts heading in the wrong direction. Five years ago, borrowers were fixing at rates starting with a one. Today, they’re refinancing into rates above five, turning a £781 monthly mortgage payment into £1,188 and adding almost £5,000 a year to household costs. The sting is that mortgage rates remain higher than they were the last time the Bank of England base rate stood at 4%, showing lenders are still pricing in greater risk and uncertainty.
“While tackling inflation remains essential, the benefit of the £100 support package to help curb rising energy bills as announced in the Budget feels short-lived if households are simultaneously facing mortgage increases worth several times that amount each month. Spiralling costs on all fronts risk leaving this as little more than an empty gesture from the Chancellor.”
Simon Wright, UK Co-Chief Executive Officer for PEXA: “A rise in interest rates will be unwelcome news for many households, particularly those approaching remortgage or considering a move. Higher borrowing costs will inevitably place additional pressure on affordability and may lead some consumers to delay their plans for buying or remortgaging.
“While this could contribute to a slowdown in activity, it also gives the industry an opportunity to focus on the systems and processes that support property transactions. Reducing unnecessary friction and improving connectivity can help ensure property professionals are well equipped to support consumers when market activity picks up again.
“At a time when every financial decision carries greater weight, a more connected property ecosystem can give buyers, sellers and those remortgaging greater confidence to move forward, while enabling conveyancers, lenders and other property professionals to focus on providing the support and guidance their clients need.”
Katrina Lamont, Director of Legal Operations at Eden Conveyancing: “The Bank of England’s decision to raise Bank Rate to 4% will be unwelcome news for many buyers and homeowners, but first-time buyers are likely to feel it most. Many are already stretching to cover deposits and higher living costs, so even a quarter-point rise can affect how much they can borrow. Anyone planning to buy should speak to a mortgage adviser, review their budget and check the terms and expiry date of any existing mortgage offer.
“However, it’s important first-time buyers don’t feel discouraged. A rise doesn’t mean the door to home ownership is closing, but it does make preparation even more valuable. Understanding the full costs involved, getting a mortgage in principle early, and choosing a conveyancer who will explain each step clearly can help people move forward with confidence.
“First-time buyers can also take encouragement from the support announced in the Autumn Budget. The new Your First Home scheme and First-Time Buyer ISAs are both aimed at helping people get onto the property ladder and giving them more options when saving and planning their purchase. Higher rates are a potential hurdle, but they’re far from the end of the road.”
Richard Donnell, Executive Director at Zoopla: “Higher mortgage rates have been a drag on housing market activity since the Spring with sales agreed down 8% on last year and this latest increase in the base rate set to make more buyers pause and wait on their home buying decisions.
“Current mortgage rates already reflect financial market expectations of four further base rate increases, meaning average mortgage rates are unlikely to rise significantly in the short term unless those expectations change.”
“While there are fewer sales than this time last year, sales that are being agreed are happening just as quickly as a year ago as serious buyers become more selective. There is demand to buy homes but sellers need to price their homes carefully to ensure they attract the active buyers.”
Nathan Emerson, CEO at Propertymark: “As the Bank of England continues to navigate wider economic pressures, including rising inflation, it comes as little surprise that base rate decisions remain focused on maintaining economic stability.
“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.”
Oliver Prior, Managing Director at Auction House:“It came as little surprise that the Monetary Policy Committee voted to raise the base rate from 3.75% to 4% following a period of rising inflation.
“This is the first rise in over three years, and it is a sharp turn from where many of us expected to be.
“The knock-on effect for the lending market will be felt quickly. As the cost of debt goes up, the numbers on a lot of deals stop working. Investors who rely on finance will see their margins squeezed, and some will be priced out of the property market altogether. When viability is stretched this far, values have to give, and I expect we will see a correction in capital values as the market adjusts.
“For property sales, that makes realistic pricing and certainty of sale more important than ever. With buyers cautious and borrowing more costly, we’re likely to see an increase in homes selling at auction, which gives both sides a fixed timeframe and a committed sale – exactly what stakeholders need when conditions tighten.”
John Phillips, CEO of Just Mortgages and Spicerhaart: “While there has been some welcome news for the UK economy, with falling unemployment, GDP growth and a relatively muted Budget, inflation remains a very real problem. The decision to raise the base rate on Bonfire Night is an attempt to dampen the fuse, but with the Middle East conflict still ongoing and both energy and fuel prices expected to push inflation higher, it’s fair to say that there could still be plenty of fireworks ahead.
“Despite this decision being widely expected, we have still seen positive movements from multiple lenders over the last few days amid a recent easing in swap rates. It’s a reminder of the key message brokers need to be sharing with clients – mortgage rates and the base rate are not joined at the hip. While lenders will always want to be prudent in their pricing given the current climate, they also need to consider their competition and market share, alongside their progress against end-of-year lending targets.
“While rates do remain volatile, options are still out there for those looking to make moves or realise their dream of homeownership. Independent advice is the best way to not only explore those options, but to navigate the current market. Now is the time for brokers to be front-footed, proactive and visible.”
More commentary to follow…
