The Bank of England Has Raised Rates to 4%. What It Means for Property Investors.
RealYield Team
Property Analyst
The Bank of England has raised interest rates for the first time since August 2023. On Thursday 5 November the Monetary Policy Committee voted 8 to 1 to lift Bank Rate from 3.75% to 4%. The one dissenter, Catherine Mann, wanted to go further, to 4.25%. For property investors the rise itself is a quarter of a point. What sits behind it matters more: the Bank now expects inflation to reach around 5% by the middle of next year.
Here is what changed, who pays first, and what a quarter point actually does to a typical buy-to-let once costs and tax are counted.
Why the Bank moved
The short answer is energy. The Bank's summary says energy prices have risen further as the Middle East conflict enters its ninth month. Over the 15 working days to 27 October, Brent crude futures averaged $108 a barrel. CPI inflation was 3.5% in September, up from 2.6% in June.
The Committee's own wording is direct: "the degree of inflationary pressure in the pipeline is now sufficient to warrant an increase in Bank Rate." The worry is second-round effects. If higher fuel and energy bills feed into pay deals and shop prices, inflation stays high long after oil prices settle. Evidence of that is still limited, the Bank says, but many underlying inflation measures have stopped falling.
The Bank's projection has CPI at around 4.5% in the first quarter of 2027 and around 5% in the second quarter, then falling back. It also expects last week's Budget to take about a quarter of a point off inflation by mid-2027.
Is this the start of a run of rises?
The Committee was careful not to promise anything. "Monetary policy is not on a pre-set path," the summary says. The individual members did not all read the outlook the same way, though.
Governor Andrew Bailey said: "Without news which softens the risks to inflationary pressures, I can see the argument for a further increase in rates." Alan Taylor took the opposite line, calling it "a risk-management 'one-for-now' insurance hike" and adding that "this is not the start of a hiking cycle."
Frequently Asked Questions
What did the Bank of England decide on 5 November 2026?
The Monetary Policy Committee raised Bank Rate by 0.25 percentage points, from 3.75% to 4%. The vote was 8 to 1. Eight members backed the quarter point rise and Catherine Mann voted for a bigger rise, to 4.25%. It is the first increase since August 2023. The next decision is due on 17 December 2026.
Why did the Bank of England raise interest rates?
Energy prices. The Bank says energy costs have risen further as the Middle East conflict enters its ninth month, CPI inflation was 3.5% in September, and it now expects inflation to reach around 5% by the middle of 2027. The Committee judged that the inflationary pressure in the pipeline was now enough to justify a rise, partly to stop higher prices feeding into wages and other prices.
Does a Bank Rate rise affect my fixed-rate buy-to-let mortgage?
Not while the fix lasts. Your payment stays the same until the deal ends. The rise matters when you remortgage, but fixed rates are priced from swap rates, which had already moved up in the weeks before the decision because markets expected it. Tracker and standard variable rate borrowers feel it straight away instead.
How much does a 0.25 percentage point rise cost on an interest-only buy-to-let mortgage?
On an interest-only loan the extra interest is simply the loan multiplied by 0.25%. That is £250 a year (about £20.83 a month) per £100,000 borrowed, or £500 a year (about £41.67 a month) on £200,000. Landlords in their personal name only get a 20% tax credit on mortgage interest, so most of that extra cost comes out of after-tax profit.
Will the Bank of England raise rates again?
Nobody knows. The Bank says policy is not on a pre-set path. Governor Andrew Bailey said he could see the argument for a further increase without news that softens the inflation risks, while Alan Taylor described this rise as a one-for-now insurance move rather than the start of a hiking cycle. Markets priced roughly a one in four chance of another rise in December on the day of the decision.
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