The Bank of England is expected to raise its benchmark interest rate on Thursday, according to the BBC's source report. Most analysts predict a rise from 3.75% to 4%, which would be the first increase in more than three years.

The Bank last raised rates in August 2023. The rate has since fallen from a 2023-24 peak of 5.25%, and the Monetary Policy Committee (MPC) has held it steady at its last six meetings.

Analysts attribute the expected rise to inflation, which the report says is driven mainly by the cost of petrol and diesel. The Consumer Prices Index measure of inflation was 3.5% in the year to September 2026, up from 3.1% the previous month and well above the Bank's 2% target. The report links the rise in energy and fuel costs to the ongoing impact of the Iran war. Millions of domestic energy customers face a sharp price increase in January.

CMC Markets' head of UK, Chris Cheverall, said: "The decision is increasingly less about whether rates reach 4% and more about what follows after that." He added that the Bank must balance inflation that is still too high against an economy whose growth outlook has weakened sharply.

The announcement is due at 12:00 GMT. Attention will also focus on any signals from the MPC about the future direction of rates.

According to UK Finance, a 0.25 percentage point rise would add £31 a month to repayments for a typical tracker mortgage holder. The report says about 510,000 people hold tracker mortgages. For the roughly 470,000 people on variable deals, the typical increase would be £14 a month, though this depends on when their lender passes on the change. Borrowers on fixed deals will not see an immediate change, but lenders have already priced in the expected rise. As of 4 November, Moneyfacts put the average two-year fixed residential mortgage rate at 5.96% and the average five-year rate at 5.99%.

Broker L&C said some borrowers now face almost £5,000 more a year in repayments on a £200,000 mortgage over 25 years than those who remortgaged in 2021. Moneyfacts' Rachel Springall said the choice between fixed and tracker deals "ultimately depends on borrowers being confident they can stomach future rises."

Savers could see better interest rates if the Bank rate rises. The report also says the cost of some other new loans could be affected.