Bank of England raises rates to 4%, first increase in three years, as MPC flags possible further move

The Bank of England raised its base rate from 3.75% to 4%, the first increase in more than three years, citing inflation driven by the Iran war.

• Eight members of the monetary policy committee voted for the rise; Catherine Mann preferred a half-point increase.
• Governor Andrew Bailey said a further increase is possible unless risks to inflation soften, with the next decision set for 17 December.
• The Bank forecasts inflation reaching 4.9% in mid-2026, up from 3.5% in September.
• About 500,000 homeowners on tracker mortgages face roughly £31 more per month in repayments.
• The Bank raised its growth forecasts for this year and next to 1.6% and 1.3%, attributing part of the performance to AI spending.
• Governor Andrew Bailey cautioned against viewing the move as the first in an inevitable long series of hikes.
• New borrowers face average fixed mortgage rates at a three-year high of 5.89%.