The Bank of England is widely expected to keep interest rates unchanged this week, although growing divisions among policymakers suggest that the pressure for another rate rise is increasing.
The Monetary Policy Committee (MPC) will announce its latest decision on Thursday 17 September, with Bank Rate currently sitting at 3.75%. Economists overwhelmingly expect rates to remain at this level for now.
Pressure Building for a Rate Rise
While markets are expecting another hold, the decision may not be completely straightforward.
At the Bank’s previous meeting in July, the nine-member MPC voted 6–3 in favour of keeping rates at 3.75%, with three members wanting an immediate 0.25 percentage point increase to 4%.
That was a change from June, when only two policymakers voted for higher rates, suggesting support for tighter monetary policy has been growing.
Bank of England Chief Economist Huw Pill is among those who have warned that higher interest rates may be required to control inflation.
The Bank remains particularly concerned about energy prices and the impact that higher costs could have on inflation across the wider economy.
Economists Expect Rates to Stay at 3.75%
Despite those concerns, a Reuters survey of 65 economists found that every respondent expected the Bank to leave rates unchanged at September’s meeting.
Almost 90% also expect Bank Rate to remain at 3.75% for the rest of 2026, although eight economists believe rates could rise to 4%.
This means borrowers hoping for further interest rate cuts could be waiting considerably longer than previously expected.
Mortgage Rates Are Already Moving Higher
The bigger issue for property buyers and landlords is that mortgage pricing does not simply follow Bank Rate.
Swap rates, which play an important role in how lenders price fixed-rate mortgages, have risen sharply. The Negotitator reports that swap rates have reached their highest level in around three years, with volatility in international bond markets contributing to higher borrowing costs.
As a result, mortgage rates have started climbing again, despite Bank Rate remaining unchanged.
This highlights an important point for borrowers: the Bank of England does not actually need to increase Bank Rate for mortgage costs to rise.
If financial markets believe rates will remain higher for longer — or that another increase is becoming more likely — lenders may reprice their mortgage deals accordingly.
Housing Market Shows Signs of Weakness
Higher mortgage costs could add further pressure to a housing market that has already shown signs of slowing.
Bank of England figures show that mortgage approvals fell to 56,100 in July, compared with 58,200 in June, a decline of 2,100 approvals in just one month.
A prolonged period of higher mortgage rates could make affordability more difficult for buyers and potentially reduce transaction numbers.
For landlords, higher borrowing costs could also place additional pressure on profitability, particularly for investors approaching the end of cheaper fixed-rate mortgage deals.
What Happens Next?
Thursday’s decision is therefore likely to be less about whether rates change immediately and more about what the Bank says about the months ahead.
A hold at 3.75% appears to be the overwhelming expectation.
However, if more MPC members vote for a rise, or the Bank signals that inflation risks are increasing, markets could begin pricing in a higher chance of rates reaching 4%.
That could push swap rates and mortgage pricing even higher.
For homeowners, landlords and property investors, the important figure to watch this week may therefore not simply be the headline Bank Rate — but how close the MPC is getting to voting for another increase.
Download NOW
4 Simple Steps To Becoming Wealthy Through Property