Bank of England Building, London, UK - Diliff

Economy5 Nov, 18:30 UTCUnited Kingdom

Bank of England lifts base rate to 4%, first rise in over three years

The Bank of England raised its base rate from 3.75% to 4% and warned another increase may follow. Higher rates mean more costly borrowing for many households, including those with mortgages.

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Photo: Diliff, CC BY-SA 3.0, via Wikimedia Commons

Economy · 5 Nov, 18:30 UTC

The Bank of England has raised its base rate, the main rate that sets borrowing costs in the UK, from 3.75% to 4%. It is the first increase in more than three years. The move is a rise of 0.25 percentage points.

Economy

Eight of the nine members of the Bank's monetary policy committee, the panel that sets rates, voted for the quarter-point rise. The ninth, Catherine Mann, wanted a larger half-point increase.

In numbers

4%Bank of England base rate
3.75%Previous base rate
5%Inflation forecast, mid-2027

Pound in dollars, the past month

1.3453up +1.77%

Economy

The Bank said the Iran war has pushed up energy costs and unleashed inflationary pressure. It warned that another rise may be needed to contain it. It also predicted that inflation will approach 5% by the middle of 2027.

The rest of the story

The decision came a week after the budget. It runs against analysis from the Office for Budget Responsibility, which predicts lower inflation and little push for wage growth.

After the decision, prices of government bonds climbed. As a result, the return that investors earn on 10-year gilts issued by the UK fell 4 basis points, which is 0.04 of a percentage point. It slipped under 5.1%, the lowest level since August 28.

For households the change is direct. Millions of people face higher mortgage payments. The rise also lands while many families are already struggling with a second cost of living crisis in four years, so many may find the decision hard to accept.

Background

The Bank links the rise in inflation to higher energy costs caused by the Iran war. Households are already under strain from a second cost of living crisis in four years.

People in this story

Catherine Mann, Monetary policy committee member

MoneyVision newsroom · Published 5 Nov, 18:30 UTC

This article is not investment advice. It was written by our automated newsroom from published reports and official statements, using only the facts in them. How we work · Report a mistake
Photo: Diliff, CC BY-SA 3.0, via Wikimedia Commons

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