Base rate hold at 3.75% does not end priced-in mortgage rises

The Bank of England held Bank Rate at 3.75% on 17 September 2026, but commentators told Mortgage Solutions the base rate hold has not stopped mortgage costs rising. Three of the nine Monetary Policy Committee (MPC) members voted for an increase to 4%, according to the Bank's September 2026 Monetary Policy Summary. Mortgage Solutions reported the same day that lenders and the financial market expect the MPC to vote for a rise soon.

How close was the September base rate vote?

Closer than the headline suggests. Bank Rate is the Bank of England's base rate, which tracker mortgages follow and lenders price against. The MPC voted 6-3 to keep it at 3.75% at its meeting ending 16 September. Megan Greene, Catherine L Mann and Huw Pill preferred a 0.25 percentage point increase to 4% (Bank of England, 17 September 2026). Mortgage Solutions described the decision as the sixth consecutive hold.

The Committee's assessment of the risks has hardened. It judged that "the risks to the inflation outlook are tilted to the upside, and more so than at the time of the July Monetary Policy Report". It also said it "stands ready to act as necessary" to keep CPI inflation on track for the 2% target (Bank of England, 17 September 2026). A one-third minority for a rise, plus that wording, is the backdrop to the reaction below.

Mark Harris, chief executive of SPF Private Clients, pointed abroad. He told Mortgage Solutions that the US Federal Reserve and European Central Bank had raised their rates. After that, the "pressure was on Governor Andrew Bailey and the Monetary Policy Committee to follow suit, but they resisted". He said this cautious response was correct for now, as it provided stability.

What does "priced in" mean for mortgage rates?

"Priced in" means markets have already built an expected rate rise into today's borrowing costs. The data shows a clear gap between two measures. Nearly all respondents to the Bank's September Market Participants Survey expected a hold, with median expectations implying a prolonged period of unchanged Bank Rate. By contrast, the UK short-term interest rate curve was upward sloping, peaking at around 4.9% by end-2027 (Bank of England minutes, 17 September 2026). The minutes add that, beyond the near term, elevated risk premia were thought to remain a material contributor to that upward slope.

That curve feeds straight through to lending. The minutes record "full and fast pass-through" from short-term market rates to household borrowing. The quoted rate on two-year fixed-rate mortgages was around 95 basis points (0.95 percentage points) higher than before the Middle East conflict began (Bank of England, 17 September 2026). As an illustration, 0.95 points on £200,000 of interest-only borrowing is £1,900 a year, or about £158.33 a month.

Commentators told Mortgage Solutions that repricing is happening without a Bank Rate move. Ryan McGrath is director of second charge mortgages at Pepper Money. He said swap rates "already reflect where the market expects the base rate to go". As a result, he said, lenders "will keep adjusting their own products with or without a Bank of England move". Swap rates are what lenders pay to fix their own funding costs. We tracked that pressure in our analysis of UK fixed mortgage rates and swap rate pressure.

Ben Allen, managing director of The Right Mortgage & Protection Network, said the hold felt "slightly irrelevant because change is taking place anyway". He described "some lenders having to reprice more than once in a week" (Mortgage Solutions, 17 September 2026). Harris added that borrowers still faced "an upward trajectory in mortgage pricing", although swap rate rises had eased in recent days.

Why is inflation driving the rate outlook?

Inflation has turned back up after dipping in June. The Office for National Statistics (ONS) published its August figures on 16 September 2026. CPI (Consumer Prices Index) inflation rose to 3.1% in the 12 months to August, up from 2.9% in July. That compares with the lowest reading of the past 12 months, 2.6% in June 2026, and 3.8% in August 2025, so the rate is lower year-on-year but rising again.

The underlying picture is energy. The Bank's minutes attribute around 0.7 percentage points of the 1.1-point overshoot above the 2% target to the direct effects of energy prices, mostly motor fuels. The Committee said CPI inflation "is likely to rise further over coming quarters" (Bank of England, 17 September 2026). Allen told Mortgage Solutions the August rise was in line with expectations and mainly driven by fuel.

Commentators split on whether holding was right. Julian Jessop, economic fellow at the Institute of Economic Affairs, called the decision "understandable" but said it risked the Bank being accused of "kicking the can further down the road". Anthony Curtis, director of mortgage broker Forto Finance, said the UK was not "magically immune to the global oil shock" (Mortgage Solutions, 17 September 2026). For how rate cycles shift the case between strategies, our property investment strategies hub sets out the options.

Will the Bank of England raise rates next?

That is a forecast, and the forecasts differ. Curtis told Mortgage Solutions: "The hold decision means that next month, a rise is pretty much nailed on." He added that "people shouldn't get too comfy". Nigel Bishop, founder of Recoco Property Search, was more measured: "A hike in interest rates later this year is still very much on the table."

Others see limits to how far rates go. In Jessop's words, "There are strong arguments against raising UK interest rates as far as the markets are currently expecting". He cited the weakness of the labour market and of broad money growth. Allen said there was a question as to whether a base rate hike had simply been postponed (Mortgage Solutions, 17 September 2026).

The calendar matters here. The Bank of England's published schedule lists the next MPC announcement on Thursday 5 November 2026, with no decision scheduled in October. The three members who voted for a rise wanted a 0.25 percentage point move. As an illustration, on a £200,000 interest-only BTL (buy-to-let) mortgage, 0.25 points is £500 a year, or £41.67 a month.

On a tracker (a mortgage priced at Bank Rate plus a fixed margin) that cost would follow any Bank Rate change directly. You may wish to re-run your rental coverage at a higher rate with our free BTL stress test calculator. If a fixed deal ends within the next year, consider asking your broker how current pricing compares with your existing rate.

That conversation is worth having early, because the rate you are offered depends on market pricing on the day. Our negotiation and finance blog hub covers how to prepare for a remortgage (switching your loan to a new deal or lender) discussion.

Key takeaways

• The Bank of England held Bank Rate at 3.75% on 17 September 2026 on a 6-3 vote, with three members preferring a rise to 4%.

• The UK short-term interest rate curve peaked at around 4.9% by end-2027 at the time of the September meeting, even though median expectations in the Bank's Market Participants Survey implied a prolonged hold (Bank of England minutes, 17 September 2026).

• Quoted two-year fixed mortgage rates were around 95 basis points higher than before the Middle East conflict, showing markets move borrowing costs ahead of Bank Rate.

• CPI inflation rose to 3.1% in August 2026 from 2.9% in July (ONS), and the Bank expects it to rise further over coming quarters.

• The next scheduled MPC announcement is on 5 November 2026; a 0.25-point rise would add £41.67 a month on £200,000 of interest-only borrowing (illustrative).