Bank of England holds base rate at 3.75% despite mounting inflationary pressures

Many predict the central bank could raise rates in November.

The Bank of England’s Monetary Policy Committee (MPC) has voted to keep the base rate at 3.75% for a sixth consecutive time despite UK households and businesses facing growing pressure from inflation.

Only yesterday, it was revealed that the rate at which prices of goods and services are rising accelerated to 3.1% in the year to August – a five-month high and more than one percentage point above the central bank’s 2% target. This increase was largely due to fuel prices becoming more expensive as ongoing conflict in the Middle East continues to disrupt global supply chains.

Worryingly, in a worst-case scenario, the Bank of England currently projects that inflation could reach as high as 4.5% in the second quarter of next year as a direct result of substantially higher energy prices. Such concerns have fuelled expectations for the MPC to increase the base rate at its next scheduled meeting (on 5 November 2026) in a bid to keep rising costs in check.

“Mortgage pain shows no sign of easing” warns Finance Expert

But, even though the base rate has remained unchanged so far this year, there hasn’t been much respite for borrowers.

The past few weeks alone have seen waves of rate hikes from mortgage lenders as they react to inflation forecasts and volatility in the swap market, Rachel Springall, Finance Expert at Moneyfactscompare.co.uk, explained. She added that some lenders, including NatWest, Santander, HSBC and TSB, have even increased selected fixed mortgage rates for a second time this month.

As a result, the average rate charged by a two-year fixed mortgage deal rose from 5.63% at the beginning of August to 5.73% earlier this week (15 September 2026). Meanwhile, the average five-year fixed mortgage rate made an even bigger jump from 5.66% to 5.78% over the same timeframe.

“The mortgage pain shows no sign of easing for those borrowers who cannot yet lock into a new deal, particularly those with a five-year fix who are not due to refinance until 2027,” said Springall. “Back in February 2022, there were sub-2% fixed mortgages available, so moving off this rate will be a huge shock for borrowers,” she added.

Could the Autumn Budget offer support?

The upcoming Autumn Budget might be among reasons the MPC held off making any changes to the base rate this time around, as any new measures unveiled have the potential to alter economic forecasts.

However, anyone delaying their mortgage search while they wait to see if the Government announces additional support for buyers is being urged to “drown out the political noise and concentrate on their personal situation” by Oliver Dack, Spokesperson at Mortgage Advice Bureau.

“Putting off finding a mortgage will likely only add to borrowers’ frustrations in the long run,” Dack warned. “Even if the Budget contains changes that could improve affordability, it’s unlikely these would take immediate effect. In the meantime, mortgage rates could climb even higher and existing borrowers risk reverting to a lender’s expensive Standard Variable Rate,” he explained.

“We’re encouraging those coming off a fixed rate to book a new deal sooner rather than later,” Dack continued. “Rest assured that we regularly monitor the market and will look to move our clients onto a cheaper deal if one becomes available before their start date,” he added.

That being said, not every lender lets customers lock in a new mortgage up to six months ahead of their current deal ending. “It is vital that lenders and brokers help customers understand the implications of ending their deal early, such as the early repayment charges,” said Springall.

Savers missing out on billions of pounds

Meanwhile, with the Bank of England estimating that around £300 billion is sitting in accounts earning no interest, UK savers could be missing out on a combined total of £12 billion a year in interest if this money instead earned a rate of 4%, according to analysis by Moneyfactscompare.co.uk.

“Amid a cost of living crisis, every pound counts,” said Springall. “Saving little and often is the key to building a healthy nest egg, but an even bigger difference can be made by putting spare payday cash into an inflation-busting savings account,” she continued.

But, while Springall explained that easy access accounts are a “firm favourite” among savers due to their flexibility, she also said that “not every saver will make time to open one” or will hold one “with their main bank for convenience”. She warned that this oversight comes at a cost, as some of the most flexible accounts from big banks pay just 1.16% on average^*.

By contrast, over 190 easy access accounts could better the rate of inflation at the time latest figures were released yesterday, with some of the most competitive options currently offering 4.00% or more.