The Bank of England is expected to raise its benchmark interest rate on Thursday, from 3.75% to 4%, according to most analysts cited by the BBC. It would be the first increase in more than three years.

The Bank last raised rates in August 2023. Since then, the rate has fallen from its 2023-24 peak of 5.25%. The Monetary Policy Committee has held the rate at its last six meetings.

Analysts say rising inflation, driven mainly by petrol and diesel prices, will push policymakers toward a hike. The Consumer Prices Index measure of inflation was 3.5% in the year to September 2026, up from 3.1% the previous month. That is well above the Bank's 2% target. The source attributes the energy and fuel pressure to the ongoing impact of the Iran war.

Chris Cheverall, head of UK at trading platform CMC Markets, said the decision is less about whether rates reach 4% and more about what comes next. "A quarter-point rise is already widely expected, but the Bank now has to balance inflation that is still too high against an economy where the growth outlook has weakened sharply," he said.

The announcement is due at 12:00 GMT on Thursday. Attention will also focus on any guidance from the committee about future rate moves.

UK Finance estimates that a 0.25 percentage point rise would add £31 a month to repayments for a typical tracker mortgage. The report says about 510,000 tracker mortgage holders would be affected immediately. Typical variable-rate borrowers, about 470,000 people, would face a £14 monthly increase, depending on when their lender passes on the change.

Borrowers on fixed deals will not see an immediate change. Rachel Springall of Moneyfacts said lenders have already priced in the expected rise. As of 4 November, the average two-year fixed residential mortgage rate was 5.96%, and the average five-year rate was 5.99%, according to Moneyfacts. Broker L&C said some borrowers renewing a five-year deal now face almost £5,000 more a year on a £200,000, 25-year mortgage than those who remortgaged in 2021. Five years ago, the average five-year fixed remortgage rate among the 10 biggest lenders was 1.30%.

Savers could earn higher rates on deposits if the Bank rate rises, according to the report.