Interest rates are up to 4%: what it means for your money

The Bank of England put interest rates up on Thursday. Bank Rate rose by 0.25 percentage points, from 3.75% to 4%. It’s the first rise since August 2023.

Eight of the nine members of the Monetary Policy Committee voted for it. One wanted to go further, to 4.25%. You can read the decision in full in the Bank of England’s Monetary Policy Summary.

Here’s what it means for you, and what to do about it.

Why rates went up

It’s about energy. The conflict in the Middle East is in its ninth month, and energy prices have kept rising. Inflation rose to 3.5% in September, and the Bank expects it to reach around 5% by the middle of next year.

The Bank can’t bring energy prices down. What it’s trying to do is stop higher energy bills spreading into everything else, like the price of food, services and wages. Raising rates makes borrowing more expensive, which slows spending and takes some heat out of prices.

If you have a mortgage

What happens next depends on the type of deal you’re on.

• Fixed rate: nothing changes until your deal ends. Your payment stays the same.
• Tracker: your rate follows Bank Rate, so your payment goes up. Your lender will tell you how much and from when.
• Standard variable rate: your lender decides. It doesn’t have to follow Bank Rate, but many do.

Take a £200,000 repayment mortgage over 25 years. A rate 0.25 percentage points higher adds about £29 a month, or around £350 a year. It’s not a huge jump on its own, but on top of higher energy bills it adds up.

If your fixed deal ends in the next six months

This is where the rise matters most. Fixed rates were already climbing before Thursday, because lenders price them on where they think rates are heading, not just on today’s Bank Rate.

The average two-year fixed rate was 5.96% on 4 November, up from 4.83% in January, according to Moneyfacts. That’s its highest level since December 2023.

On the same £200,000 mortgage over 25 years, a rate of around 6% means a monthly payment of about £1,289. If you’re coming off a deal at 3.5%, that’s around £290 a month more.

What to do:

1. Find your end date. It’s on your mortgage offer or your annual statement.
2. Work out your new payment now. Use today’s rates, not the rate you’re on. Don’t wait for the letter from your lender.
3. Find the money for it before it starts. Look at where the extra £100, £200 or £300 a month will come from, while you still have time to plan.

Many lenders let you secure a new deal up to six months before your current one ends, so starting early gives you more options.

If you’re a saver

Higher Bank Rate can mean better savings rates. But banks don’t have to pass the rise on, and many are slow to.

• Check your rate in the next few weeks. If it hasn’t gone up, it may be time to move your money.
• Use your ISA allowance first. From April 2027, tax on savings interest outside an ISA goes up again, to 24% for basic-rate taxpayers. Here’s what the Budget changed for savers.
• Thinking about fixing? My article on fixed-rate savings goes through when it’s worth locking in.

If you’re moving a large amount, check it’s protected. Some banks share one banking licence, and with it one £120,000 compensation limit. My free guide shows which ones: peterkomolafe.com/fscs.

What happens next

The next decision is on Thursday 17 December. The Bank says rates aren’t on a set path and it will decide meeting by meeting, watching how far higher energy prices spread into other prices and wages.

Moneyfacts’ Rachel Springall said that if the Bank signals a calmer path, fixed mortgage rates “could reduce slightly before the year is over”. Nobody knows for sure, so plan for today’s rates rather than hoping for lower ones.

Correct as of 6 November 2026, based on the Bank of England’s Monetary Policy Summary published on 5 November 2026 and Moneyfacts data published on 4 November 2026.