Bank of England Holds Rates at 3.75% as Inflation Pressure Mounts
The Bank of England's Monetary Policy Committee held interest rates unchanged at 3.75% on 17 September, though the vote was split 6-3, with three members pushing to raise rates to 4%. The Bank warned that if higher energy price volatility persists, rate rises may be needed to keep inflation at its 2% target.
On 17 September, the Bank of England's Monetary Policy Committee held rates at 3.75% on a 6-3 vote, with three members backing a 0.25 percentage point increase. This was the sixth consecutive hold this year, but the split decision signals growing concern about inflation.
CPI inflation was 3.1% in August—above the 2% target—and the MPC expects it to rise slightly above 4% in early 2027. The Bank expects inflation to reach around 3.75% by the end of 2026, driven largely by increased energy and fuel prices. While higher global energy costs have had limited effect on price and wage setting so far, the longer this volatility persists, the bigger the impact will be on inflation and the likelihood of a rate rise.
What this means for you:
- Mortgage holders: Average 2-year fixed rates sit around 5.63% and 5-year fixes around 5.68% (as of early September), which reflects market expectations of future rate moves rather than just the current 3.75% base rate. If your deal ends in the next six months, consider locking in rates now.
- Savers: If rates rise, new savings accounts will offer better returns, but if held, they may fall. Consider locking in 1-2 year fixed deposits now if rates appeal.
- Renters and expats paid in pounds: Currency fluctuations are sensitive to rate decisions. The next decision is on 5 November 2026.
Sources
Independent app, not a government. General information, not advice. The official source:
