Bank of England Holds Rate at 3.75 Percent as Three MPC Members Vote to Raise to 4 Percent

The Bank of England held Bank Rate at 3.75 percent on 17 September 2026, with three of the nine Monetary Policy Committee members voting instead to raise it to 4 percent. The split matters more than the decision. It is the clearest signal yet that the next move in UK borrowing costs is more likely to be up than down, and UK mortgage pricing has already been written on that assumption.

What changed

Bank Rate stays at 3.75 percent, where it has sat since December 2025. The vote was 6 to 3. Andrew Bailey, Sarah Breeden, Swati Dhingra, Clare Lombardelli, Dave Ramsden and Alan Taylor voted to maintain. Megan Greene, Catherine Mann and Huw Pill voted to increase Bank Rate to 4 percent.

The inflation picture behind the dissent is the reason to pay attention. CPI inflation ran at 3.1 percent in August 2026, against a 2 percent target. The Committee projects it will rise to around 3.75 percent in the fourth quarter of 2026 and reach slightly above 4 percent in the first quarter of 2027. That is a forecast of inflation getting worse before it gets better, published by a committee that has just chosen not to act on it.

The offsetting argument is the labour market. The MPC described labour demand as weak, with unemployment at 4.9 percent in the three months to July, although it noted that some timely indicators of hiring, including the KPMG and REC measure, had edged up in August. GDP grew 0.4 percent in the second quarter of 2026 and 0.4 percent in July alone, and the Committee projects 0.4 percent for the third quarter.

The next scheduled decision is 5 November 2026.

The mechanism

Bank Rate is set by the nine-member Monetary Policy Committee by simple majority vote, with a remit to hold CPI inflation at 2 percent in the medium term. The Committee publishes the Monetary Policy Summary and the full minutes on the day of the decision, which is why the voting record is public immediately rather than with a lag.

The transmission into property runs through two separate channels. Tracker and standard variable mortgages move with Bank Rate directly, so a hold means those payments do not change this month. Fixed-rate mortgages are priced off swap rates, which reflect where markets expect Bank Rate to be over the life of the fix, not where it is today. A hold delivered alongside three votes for a hike and a forecast of 4 percent inflation does not cheapen swaps. In the Committee's own words, it stands ready to act as necessary to ensure CPI inflation remains on track to meet the 2 percent target in the medium term.

What it means for a foreign buyer

The practical figure is the mortgage rate, not the base rate. On 17 September, average two-year and five-year fixed mortgage rates both stood at approximately 5.39 percent. That flat shape is the point. When markets expect cuts, the five-year fix normally prices below the two-year. It does not here, which means lenders are not offering a discount for locking in longer, because they do not expect the next few years to be cheaper.

For context on where that sits, the same two-year average was 4.25 percent before the war in Iran began, and peaked at around 5.43 percent during the period of heightened tension in April. Rightmove's Matt Smith noted that financial markets are still pricing in the possibility of further base rate increases in the months ahead, so borrowers should not treat current pricing as a peak.

Non-resident buyers carry costs on top of that. A 2 percent surcharge applies to residential property in England and Northern Ireland bought by non-UK residents on or after 1 April 2021, and it sits on top of all other residential SDLT rates, including the higher rates for additional dwellings. Those higher rates, in force since 1 April 2025, run from 5 percent up to £125,000, 7 percent to £250,000, 10 percent to £925,000, 15 percent to £1.5 million and 17 percent above that. A non-resident buying an additional dwelling therefore pays 19 percent on the slice above £1.5 million once the surcharge is added.

A cash buyer is insulated from the rate question but not from the surcharge. A leveraged buyer waiting for cheaper money now has a committee forecast telling them the wait may be long.

Context

The UK does not restrict foreign ownership of residential property. Non-residents buy freehold or leasehold on the same legal footing as residents, and the friction is fiscal rather than legal, applied through the stamp duty surcharges above and through UK tax on rental income and gains. That makes the rate path unusually decisive for foreign demand here compared with markets that gate entry through ownership caps or investment thresholds. UK house prices have been grinding upward at low single digits, with annual growth of 1.6 percent recorded in August, a pace that leaves little room to absorb higher financing costs.

The UK is not moving alone. The US Federal Reserve raised rates to 3.75 to 4 percent in its first hike since 2023, and euro area borrowers have seen Euribor push variable mortgage costs to their sharpest rise in three years. The September hold puts the Bank of England behind that turn rather than exempt from it.