The Bank of England is poised to raise interest rates for the first time in over three years, with analysts predicting a hike from 3.75% to 4% at their next meeting. This shift comes after six consecutive meetings where rates were held steady. Earlier in the year, rate cuts were anticipated, but the economic fallout from the US-Israel conflict with Iran has pushed global inflation higher, altering expectations.
UK inflation, measured by the Consumer Price Index (CPI), has been rising again, reaching 3.5% in September 2026, up from 3.1% the previous month. This is well above the Bank of England's target of 2%. The Office for National Statistics attributes this increase to surging petrol and diesel prices, exacerbated by the geopolitical tensions in the Middle East.
About 500,000 homeowners with tracker mortgages will see their monthly repayments increase if the Bank raises rates. For a typical loan, a 0.25 percentage point increase would add around £31 per month. Another 500,000 on standard variable rates could see a £14 rise. While 87% of mortgage holders have fixed-rate deals, their future rates are likely to be higher when their current deals expire.
As of November 3, 2026, the average two-year fixed mortgage rate stands at 5.97%, and the five-year rate at 5.99%. The average two-year tracker rate is 4.67%. Savers, meanwhile, are seeing average easy access savings account rates at 2.56%, with easy access cash ISAs at 2.77%. Those willing to lock away their money for a year can earn an average of 4.47%.