Bank of England raises rates to 4% amid inflation concerns

Summarised from 2 outlets · 3 reports · Updated 5 Nov, 19:09 · Archive

The Bank of England has raised interest rates to 4% for the first time in more than three years, citing inflation pressures from Middle East conflict.

The Bank of England's Monetary Policy Committee voted unanimously to raise the base rate from 3.75% to 4%, with one member, Catherine Mann, preferring a larger 0.5 percentage point increase. This is the first rate rise in more than three years. Governor Andrew Bailey said the increase was necessary to control inflation, which reached 3.5% in September and remains above the Bank's 2% target. He attributed inflationary pressure to rising energy costs caused by the US and Israel's ongoing conflict with Iran, and stated that further rises are likely unless the conflict is resolved.

The rate rise will have immediate consequences for mortgage borrowers. Those on tracker mortgages, which follow movements in the Bank Rate, will see their repayments increase immediately. Standard variable rate borrowers may also face higher costs if lenders pass on the increase. According to Mojo Mortgages, a borrower with a £400,000 tracker mortgage over 25 years could pay approximately £59 more per month, or £708 annually, assuming the full increase is passed on.

The Bank's Monetary Policy Committee noted that many companies have so far absorbed higher energy costs into their profit margins or hedged against price spikes. However, it warned that these 'buffers would only prove temporary' and that cost pressures would eventually pass through to consumers in higher prices for food, drink and other goods and services. Homeowners with fixed-rate mortgages will not see immediate changes, but those approaching the end of their current deals could face higher borrowing costs when remortgaging.

How it is being reported

• Mortgage holders face paying up to £708 more a year after Bank of England rate riseThe Bank of England Governor has warned that further interest rate increases could follow as homeowners face higher monthly repayments.Daily Record · 5 Nov, 13:28
• Bank of England raises interest rates to 4% in major blow for mortgage borrowersThe first increase in more than three years could mean higher monthly repayments for homeowners, while savers may benefit from better returns.Daily Record · 5 Nov, 12:22
• Interest rates rise to 4 per cent as Iran war drives up inflationTHE Bank of England has raised interest rates for the first time in more than three years and warned that further hikes are likely if the Iran war is not resolvedThe National · 5 Nov, 12:21

In this story: Bank of England · Andrew Bailey · Catherine Mann · Iran · Middle East · United Kingdom

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