Just now, the Bank of England raised its base rate to 4%, the first increase in over three years—and the move was more hawkish than expected!

Follow Property News to see what major and minor developments happened today: ・ The Bank of England raised its base rate to 4%, marking its first rate hike in over three years. ・ London’s asking rents for October rose 7.6% year-on-year—the sixth consecutive month of increases following the implementation of new legislation. ・ Global billionaires are returning to London’s luxury property market, with U.S. and Middle Eastern buyers leading demand. ・ Over 80% of landlords plan to raise rents; one-third also intend to purchase additional properties. ・ Rightmove faces a £1.5 billion class-action lawsuit; the tribunal has suspended its ruling. 1. Bank of England raises base rate to 4%—first hike in over three years Just now, the Bank of England announced a 0.25 percentage point increase, lifting the base rate from 3.75% to 4%. This is the first rate hike in over three years. The UK’s interest rate had remained unchanged at 3.75% since December 2025. 1) Voting outcome more hawkish than anticipated The Monetary Policy Committee’s vote stood at 8–1. Eight members voted in favour of a 0.25 percentage point hike. The sole dissenting vote came from Catherine Mann, who deemed the increase insufficient and advocated a 0.5 percentage point rise instead. Markets had originally expected a 7–2 split. This result revealed a notably more hawkish internal stance than previously assumed. In fact, signals had already emerged earlier: the UK’s interest rate had held steady at 3.75% since December 2025—six consecutive meetings without change. At the September meeting, however, Megan Greene, Catherine Mann, and Huw Pill had already voted in favour of a rate increase. 2) Inflation as the primary driver The main catalyst behind this shift is inflation. The UK’s August inflation rate stood at 3.1%; it jumped to 3.5% in September—above market expectations. Rising fuel prices were the chief contributor: in September, petrol averaged 169.5 pence per litre and diesel 192.5 pence per litre. The root cause lies in energy markets. Geopolitical tensions in the Middle East have pushed up oil and gas prices. The Bank of England disclosed that, over the three weeks ending late October, Brent crude averaged approximately $108 per barrel—up 38% from July’s level. What’s more concerning is the outlook ahead. The Bank’s latest forecast suggests inflation could reach around 4.5% in Q1 next year and approach 5% in Q2—increasingly distant from the 2% target. 3) Will this be the last hike? Governor Andrew Bailey stated that the case for raising rates is now compelling. He also noted that, should the Middle East situation fail to ease meaningfully, he would understand the necessity of another hike. Chief Economist Huw Pill spoke even more directly, saying one hike is likely insufficient. Megan Greene likewise believes further hikes will be needed. Alan Taylor, by contrast, adopted a more cautious stance, describing this move as a “precautionary” hike—leaving open the possibility of either further hikes or pauses going forward. A Reuters survey conducted in October found that most economists had already anticipated a November hike. Of the 61 respondents, 30 predicted another hike in Q1 next year. The next monetary policy meeting is scheduled for 17 December. 4) Mortgage rates had already risen ahead of the official decision For homeowners and prospective buyers, mortgage rate increases have already taken effect. Since early September, major banks including HSBC and NatWest have successively raised their mortgage rates. According to Moneyfacts data, the average interest rate on new UK mortgages has climbed to 5.89%.

IC Markets official website: The Bank of England is expected to raise its base rate to 4.0% on 5 November.

Economists expect the Bank of England to raise its base rate from 3.75% to 4.0% on Thursday, 5 November—the first such increase since August 2023. It is also forecast that the Monetary Policy Committee will approve the decision by a 7–2 vote, with external members Alan Taylor and Swati Dhingra most likely to maintain their stance of holding rates steady. Market attention focuses not only on whether the hike will occur, but also on how the Bank will respond to market pricing of the future path of interest rates. The immediate trigger for this round of rate-hike discussions is energy prices. Over the 12 months to September, the UK’s Consumer Price Index (CPI) rose 3.5% year-on-year—up from 3.1% in August and exceeding economists’ consensus forecast of 3.4%. Core CPI simultaneously rose to 2.8%, while services inflation climbed to 3.7%. This reading deviates from the Bank’s July forecast of 3.0%. In its September statement, the Bank had already warned that inflation could breach 4% early next year—and that the recent surge in energy prices resembles its own ‘adverse scenario’. Money markets have almost fully priced in a 25-basis-point hike on 5 November, and are betting on at least three further hikes by July 2027—bringing the cumulative total to four hikes and pushing the base rate into the 4.75%–5.0% range. Derivatives market data indicate a roughly 57.7% probability of another hike at the 17 December meeting. Yet this market bet faces scepticism from within the Bank itself. Chief Economist Huw Pill—though having voted consistently in favour of hikes—has explicitly expressed doubt about the market’s pricing of four hikes over the coming year. Alexander Harvey, UK economist at Oxford Economics, argues that the meeting minutes or Governor Bailey’s remarks may signal that the Bank Rate is unlikely to reach the levels anticipated by financial markets.

Interest Rate Rises Likely in Coming Months, Bank of England’s Chief Economist Says

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Bank of England chief economist Huw Pill signals potential interest rate hikes to curb inflation driven by high oil and gas prices. This could raise mortgage payments and affect the UK manufacturing and construction industries.

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