Bank of England interest rate rises possible as rates held at 3.75%

The Bank of England has held Bank Rate at 3.75% and warned that interest rate rises become more likely the longer energy prices stay volatile. The decision was published on 17 September 2026. The Bank said inflation, now 3.1%, will go higher still as the effects of the Middle East conflict work through the economy.

Andrew Bailey, the Governor, said: “So far, higher global energy costs have had a limited effect on price and wage setting in the UK. But the longer this volatility persists, the bigger the impact it will have on inflation, and the more likely it is we will need to raise Bank Rate to ensure that inflation falls back to our 2% target.” That is a caution rather than a signal that rates are about to move, but it is not the guidance of a rate-setting cycle that is ending.

Why the Bank of England monetary policy outlook has turned cautious

The Bank said the conflict has disrupted the transport and supply of oil and gas, pushing up household fuel costs and utility bills. It pointed to a sharp fall in the number of ships passing through the Strait of Hormuz, a route used by about a fifth of the world’s oil and liquefied natural gas. The Bank said energy prices have been very volatile since peace negotiations broke down and the conflict resumed.

It also said there is so far little evidence of significant knock-on effects on prices and wages. Higher mortgage rates and borrowing costs, and more people looking for work than jobs available, are for now helping to contain the effects of energy price rises, according to the Bank. The message has changed since the start of the year, as the table shows.

What it means for borrowers and savers

No rise has been agreed, so nobody’s payments change because of this decision. The Bank said mortgage rates for households are already higher than before the conflict began. Bank Rate is the core rate that influences what lenders charge and what savings providers pay, and the Bank says banks usually pass on rises in both directions.

As an illustration of the scale, our own arithmetic, not a Bank figure: a 0.25 percentage point rise passed on in full would add £250 a year in interest on every £100,000 borrowed, or about £20.83 a month. On £10,000 of savings, the same rise would add £25 a year in interest. Actual changes depend on each lender, your product and whether your rate is fixed.

What happens next

The Bank sets rates every six weeks or so, looking at how fast prices are rising, how the economy is growing and how many people are in work. Its next decision is on Thursday 5 November 2026. Inflation has moved around this year, from 3.3% in March to 2.8% in April, 2.6% in June, 2.9% in July and 3.1% in August, largely because of energy costs.

The Bank said the scale of the effect on inflation will depend on how long the war and its impact on global energy supply last. It added that it will do what is necessary to keep inflation on track to meet the 2% target in the medium term.

Your questions answered

What is the prediction for the next Bank of England interest rate?

The Bank has not published a forecast for the November meeting. It held at 3.75% in September and said a rise becomes more likely the longer energy volatility lasts. Its February comment that rates were likely to be cut was made before the conflict’s effect on energy prices.

Should I fix for 2 or 5 years now?

The Bank’s material does not cover fixed-rate deals, so we cannot say which term is better. The Bank says mortgage rates are higher than before the conflict, and the direction from here depends on energy prices. The choice comes down to how much certainty your budget needs, so compare total costs and any early repayment charges before deciding.

What does Martin Lewis say about mortgage rates?

The Bank of England sources behind this story contain no comments from Martin Lewis, so we do not report any. Check his MoneySavingExpert site directly for his current guidance.