Interest base rate goes up to 4%: what does it mean for you?

It’s the first increase in three years

We’ve taken a look at the thinking behind this latest decision, and whether we’ll see more hikes over the next year.

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What is the current Bank of England base rate?

The interest rate set by the Bank of England (BoE) is known as the base rate.

The current rate was decided on 5 November 2026, increasing by 0.25 percentage points to 4%. The decision was eight in favour of a 0.25% increase, and one voted for a increase to 4.25%.

This is the first change in 2026, and it means the base rate is back at the rate it was a year ago. The rate is still down on the peak of 5.25% from late 2023/summer 2024, but this marks the first time the rate has gone up since August 2023.

Will interest rates rise or fall in 2027?

The reason behind the base rate increases over recent years was to bring down high inflation (we’ve explained this in more detail below). As inflation fell closer to the Bank’s target of 2%, so did the base rate.

We had four cuts to the base rate last year, a drop from 4.75% to 3.75%, and at the start of March it was almost certain we’d see the first cut of 2026 that month, and another later in the year down to 3.25%.

But then the conflict in the Middle East began, and that has pushed oil prices up, meaning higher fuel and energy costs are here and set to continue – we know the price cap for January will be much higher than it is now. The question is for how long and by how much will prices go up?

Well, the latest inflation rate of 3.5% is expected to increase to 5% by the middle of next year. So action to increase rates was taken now to try bring it down.

Then after this, the Bank’s own forecasts, based on market predictions, have the rate reaching 4.75% to 5% by the end of next year, and staying in that range for a couple of years. Economists meanwhile have predicted just one or two more next year. And there’s the chance we could just see one more in February 2027.

But remember, this is all speculation and with continuing uncertainty in the world, these predictions can change completely.

A good example of how quickly things change is that this decision was taken at the same time this week’s USA mid-term elections. The result of these elections have already seen oil prices fall – far quicker than the Bank expected. If that stays or continues it would hopefully mean inflation isn’t so strong, or at least not last as long at higher rates.

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When is the next interest rate decision?

The rate is set every six weeks or so by the Bank of England Monetary Policy Committee, a group of nine people, with the majority vote deciding whether the rate goes up, down or stays the same.

The next meeting this year will be on:

• 17 December 2026
• 4 February 2027
• 18 March 2027
• 29 April 2027
• 17 June 2027
• 29 July 2027
• 16 September 2027
• 4 November 2027
• 16 December 2027

(full dates here).

The base rate and inflation

The driver for changing the base rate right now is inflation, which has been higher than wanted most of the time since late 2021.

Increasing interest rates is seen as the key (perhaps only) way the Bank can battle inflation, the idea being we’ll save more or have more expensive debts (like mortgages), leading to us spending less. This will force suppliers to lower prices, which in turn will see the inflation rate drop (though in most cases that doesn’t mean prices fall, they just get more expensive at a slower rate).

However, any rate hikes take time to filter down and for the inflation rate to – in theory – come under control. And if you keep increasing rates the danger is it pushes the economy into recession and cause hardship for borrowers, particularly those with mortgages.

Likewise if the Bank decides to cut the rate too early, it might not have done enough, leading to a reverse later on.

Plus, there are some price increases which are hard to avoid, such as global gas and energy spikes, and it’s harder for base rate increases to impact those.

How the base rate impacts your money

The BoE rate is a large part of what high street and online banks and lenders use to inform the rates they offer. This means it will impact the cost of borrowing on things like mortgages, loans and credit cards, but also how much you can earn on savings.

Sometimes it’s a direct correlation if you have a product with a tracker rate – something that literally changes up or down in line with the BoE rate. In that case you’ll see an instant change.

On other products you might not see an instant change – if at all. While others might have made changes in advance, anticipating what the Bank will do months if not years ahead.

So it pays to shop around to see if you can get a better deal.

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How the decision impacts your savings

Since a peak in autumn 2023, rates have generally been falling as banks price in both actual and predicted cuts (they’re fast to pass these on, but slow to give us the increases).

That has reversed in recent months with the expectation of this and future changes to come. We’ve seen fixed rate bonds go as high as 5.4% recently – pricing in more base rate increases next year. As a result, the top of the tables might not increase any further with this hike, but other providers might match what’s on offer.

We’re more likely to see fresh change to easy access accounts. That’s guaranteed to happen, and happen almost immediately, on trackers from the likes of Chase. Though I’d expect other increases, it doesn’t mean all banks will make changes to their variable rate options. And even if they do, it doesn’t mean they’ll be the best options for your money.

So keep an eye on your accounts, and compare them to our best buy tables to make sure you’re getting a decent rate.

The highest-paying savings accounts – our picks

• 6% AER current account from Santander (limited to £4,000 deposit and has monthly fee)
• 8% AER regular saver from Tembo or Santander
• 4.77% AER easy access Cash ISA from TeToro

Read more about these and the other best savings accounts in our best buys guide

The best savings accounts

Check out our list of the highest paying regular, easy-access, fixed and ethical savings accounts

How the decision impacts your mortgage

So an increase to the base rate means an increase to your mortgage, right? Not quite.

While standard variable rate (SVR) mortgages rates are based on the base rate, so could change now, and tracker rates are directly linked so will definitely change, that’s not necessarily the case for fixed rate deals.

On the whole they’re actually influenced by something known as swap rates – effectively where lenders think the rate will be in the future.

In part, that’s why we saw rates drop from major lenders earlier in the year. They anticipated a reduction at some point, and reduced rates to reflect this.

But since the war on Iran, swap rates priced in hikes as a result of inflation predictions, and as a result, rates for new mortgages increased. The average 2-year fix is now 5.97%, according to MoneyFacts.

So this increase probably won’t make much difference if you’re due to remortgage soon.

If you’re due to buy or remortgage now, it’s always worth speaking with a mortgage broker who can advise on different strategies – though since no one knows what will happen this still won’t guarantee any savings.

And for anyone who is really struggling to make their repayments, it’s important to talk to your lender to see if anything can be worked out – though bear in mind missing payments can impact your credit report.

If it’s impacting other essential spending, then see whether those companies can support reduced repayments. And if debts have built up, speak to a debt charity.

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How the base rate has changed

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