The Bank of England has increased the base rate from 3.75% to 4%, marking the first rise in more than three years. The move, announced on 5 November 2026, has implications for mortgage holders and prospective buyers navigating an already challenging property market.
The increase had been widely anticipated by financial markets, with lenders already adjusting their pricing ahead of the announcement. According to mortgage expert Matt Smith, fixed-rate mortgages had already factored in the expected rise, meaning borrowers may not see immediate changes to fixed-rate products.
Fixed-rate mortgages show limited movement
Data from Podium shows average two-year fixed rates at 5.51%, down 0.02% over the week but up 1.07% year-on-year. Five-year fixed rates averaged 5.49%, also down 0.02% weekly but up 1.01% annually. The lowest two-year fixed rate stood at 4.78%, whilst five-year products started from 4.89%.
Several major lenders made marginal cuts to fixed rates in the days preceding the announcement, though these reductions have been concentrated among products requiring larger deposits. Smith noted that fixed-rate pricing reflects lender expectations about future base rate movements and broader economic factors, rather than simply tracking current policy changes.
The rate rise comes as the property sector faces multiple pressures. Recent regulatory changes have impacted lettings revenue for major agencies, whilst rental growth continues at 5% despite lengthening void periods.
Tracker mortgages face immediate impact
Homeowners on tracker or variable rate mortgages will see more immediate effects, as these products typically follow the base rate plus a set percentage. On 5 November, variable tracker rates started from 4.48% for 90% loan-to-value mortgages, compared to 5.24% for comparable two-year fixed products and 5.25% for five-year fixes.
Smith explained that tracker rates currently offer comparatively lower costs than fixed rates across most loan-to-value bands, though this gap may narrow with further interest rate rises. Lenders have already priced in anticipated increases for 2027 into fixed-rate products, whilst tracker rates could rise further in response to future base rate changes.
Cost implications for buyers
Home-movers purchasing properties in 2026 have faced material increases in monthly mortgage costs. Smith calculated that buyers purchasing a typical flat are paying approximately £150 more per month compared to the start of the year, whilst those buying detached homes face increases of around £350 monthly.
For first-time buyers, deposit size remains a critical factor in determining available rates, with substantial differences between loan-to-value bands. The rate rise does not automatically translate to higher fixed-rate mortgages for new applicants, as lenders had already incorporated expected policy changes into their pricing.
Borrowers comparing tracker and fixed-rate products must consider potential future base rate movements and the flexibility to switch between product types. Refinancing activity continues across various property sectors as investors and homeowners reassess their financing arrangements.
The base rate increase represents the first upward movement since 2023, signalling a shift in monetary policy after an extended period of stability. Market expectations suggest further rate changes may follow in 2027, though the timing and scale remain uncertain.
