Bank Rate held at 3.75%, but three voted to raise it

The decision and the split

Source: Bank of England, 17 September 2026.

The Bank of England Monetary Policy Committee voted by a majority of 6 to 3 to maintain Bank Rate at 3.75 percent at its meeting ending 16 September 2026, with the decision published on 17 September 2026. Six members, Andrew Bailey, Sarah Breeden, Swati Dhingra, Clare Lombardelli, Dave Ramsden and Alan Taylor, voted to hold. Three members, Megan Greene, Catherine L Mann and Huw Pill, voted to increase Bank Rate by 0.25 percentage points to 4 percent. The next MPC decision is due on 5 November 2026.

The Committee judges 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, and that it stands ready to act as necessary. The vote was not a signal that the tightening cycle is over. It was a decision to wait, with three members already judging that waiting carries its own risks. Nearly all respondents to the September Market Participants Survey had expected Bank Rate to remain unchanged at this meeting, so the hold itself was widely anticipated. The split, and the language around upside risks, is the part of the decision that carries forward into pricing for mortgages, savings and sterling assets.

Why three wanted a rise

The three dissenters set out distinct arguments for an immediate increase to 4 percent. Catherine L Mann said: 'Raising Bank Rate is a better risk-management strategy when faced with uncertainty about inflation dynamics and second-round effects.' Megan Greene said: 'Waiting for definitive evidence of second-round effects before acting would leave policy behind the curve.' Huw Pill argued that a rise would signal commitment amid geopolitical uncertainty. The common thread is that the energy shock has proved stronger and more persistent than expected, that inflation will peak in early 2027 just as wage settlements are agreed, and that the slack which was expected to restrain second-round effects may already have peaked.

The inflation data behind that argument is set out in the same documents. CPI inflation increased to 3.1 percent in August and is likely to rise further over coming quarters. Around 0.7 percentage points of the 1.1 point overshoot relative to the 2 percent target was driven by the direct effects of energy prices, mostly motor fuels. Brent crude spot prices had risen 36 percent and UK wholesale gas 78 percent since the period before the July Report; at close on 14 September Brent was 106 dollars a barrel and UK wholesale gas 207 pence per therm. Ofgem's headline energy price cap for October to December is 1,723 pounds, higher than expected at the time of the July Report, and the cap is expected to rise substantially further in 2027 Q1. For the dissenters, that sequence raises the probability that energy costs feed into pay and prices before demand cools.

Why six held

The majority pointed to weaker-than-expected pass-through from energy into other goods, little sign yet of second-round effects in pay and prices, and financial conditions that have already tightened. Services inflation was 3.4 percent in August, unchanged from July and down from 4.5 percent in March. Annual growth in private sector regular Average Weekly Earnings in the three months to July was 2.9 percent, while other indicators suggest underlying private sector wage growth of around 3.5 percent. UK GDP increased 0.4 percent in 2026 Q2 and monthly GDP rose 0.4 percent in July; the unemployment rate was estimated at 4.9 percent in the three months to July. On those numbers, the labour market is loosening rather than tightening.

The Committee also records full and fast pass-through from short-term OIS rates to lending rates, noting the quoted rate on two-year fixed-rate mortgages was around 95 basis points higher than prior to the conflict. In effect, part of the tightening the dissenters want has already been delivered through market rates rather than Bank Rate. Andrew Bailey said: 'if the conflict in the Middle East persists for an extended period, as appears to be the case, and the risk of second-round effects emerging increases, it is likely that policy may have to tighten.' Alan Taylor notes Bank Rate remains materially above his estimate of neutral at 3 percent. The majority position is therefore conditional rather than settled: hold now, and tighten later if the second-round evidence arrives.

What it means for mortgages and savings

A hold does not mean fixed rates stop rising. Fixed deals are priced off swap rates rather than Bank Rate, and the Committee records that UK financial conditions have tightened further since July with full and fast pass-through to lending rates. The UK short-term interest rate curve was upward sloping, peaking at around 4.9 percent by end-2027. That is why nine lenders repriced this week, including Family Building Society raising every fixed rate product by 0.60 percentage points on 16 September 2026, and why the average two-year fixed mortgage rate stood at 5.73 percent on 15 September against 4.84 percent at the start of March 2026, according to Moneyfacts.

For savers, a hold keeps Bank Rate-linked easy access rates where they are, while fixed-rate bonds follow the same swap curve as mortgages. The practical result is a split market. Variable and tracker products tied to Bank Rate see no change from this decision. Fixed-rate savings and fixed-rate mortgages are exposed to the same upward-sloping curve, which has moved on the inflation outlook rather than on the Bank Rate vote itself. The Committee's own forecast has CPI inflation increasing to around 3 and three quarters percent in 2026 Q4, compared with 3.2 percent at the time of the July Report, and reaching slightly above 4 percent in 2027 Q1. The 3.1 percent August figure triggered the exchange of open letters between the Governor and the Chancellor of the Exchequer, published alongside the minutes.

The other decision: gilts to zero

The MPC also voted unanimously to reduce the stock of UK government bond purchases held for monetary policy purposes to zero, through a multi-year plan, with the remaining stock unwound at an annual average pace of 46 billion pounds by the end of 2034, through annual sales of 20 billion pounds alongside maturing gilts. On 16 September the stock of UK government bonds held for monetary policy purposes was 488 billion pounds, down from a peak of 895 billion pounds in February 2022. Of that, 120 billion pounds of the longest-dated gilts will be set aside to back banknote issuance, leaving 368 billion pounds to be unwound, of which 222 billion will mature passively and 146 billion will be sold.

This is a separate lever from Bank Rate and it was not contested. The unanimous vote contrasts with the 6 to 3 split on Bank Rate, and it sets a long timetable that runs well beyond the current inflation episode. For households, the gilt reduction matters indirectly, through the supply of government bonds that the market must absorb and through the term premium that feeds into swap rates. It is one reason the curve can stay elevated even when Bank Rate is held. The plan also removes an element of uncertainty for gilt investors, because the pace and the end date are now specified rather than left to annual review.

The inflation picture behind it

CPI inflation increased to 3.1 percent in August, above the 2 percent target and enough to trigger the exchange of open letters between the Governor and the Chancellor of the Exchequer, published alongside the minutes. Around 0.7 percentage points of the 1.1 point overshoot was driven by the direct effects of energy prices, mostly motor fuels. Services inflation was 3.4 percent in August, unchanged from July and down from 4.5 percent in March. CPI inflation is expected to increase to around 3 and three quarters percent in 2026 Q4, compared with 3.2 percent at the time of the July Report, and to reach slightly above 4 percent in 2027 Q1.

The energy backdrop explains the revision. Brent crude spot prices had risen 36 percent and UK wholesale gas 78 percent since the period before the July Report; at close on 14 September Brent was 106 dollars a barrel and UK wholesale gas 207 pence per therm. Ofgem's headline energy price cap for October to December is 1,723 pounds, higher than expected at the time of the July Report, and the cap is expected to rise substantially further in 2027 Q1. The Committee judges 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, and that it stands ready to act as necessary. The next MPC decision is due on 5 November 2026.

Source: Bank of England: Monetary Policy Summary, September 2026.

Related coverage on Kael Tripton: What Is the Bank of England Bank Rate?, UK mortgage rate index 2026: average rates, Bank Rate movements and what to expect, Mortgage Rates Are Falling Before the Bank Even Moves: What Was Cut and Whether to Fix, What Are Swap Rates? How They Affect UK Mortgage Rates Explained, UK Building Societies: How They Differ from Banks and Best Savings Rates.

Frequently asked questions

What did the MPC decide on 17 September 2026?

The MPC voted by a majority of 6 to 3 to maintain Bank Rate at 3.75 percent. Three members voted to increase Bank Rate by 0.25 percentage points to 4 percent. The decision was published on 17 September 2026, for the meeting ending 16 September 2026.

Who voted to hold and who voted to raise?

Voting to hold: Andrew Bailey, Sarah Breeden, Swati Dhingra, Clare Lombardelli, Dave Ramsden and Alan Taylor. Voting to raise Bank Rate to 4 percent: Megan Greene, Catherine L Mann and Huw Pill.

When is the next Bank Rate decision?

The next MPC decision is due on 5 November 2026.

Does a hold mean fixed mortgage rates stop rising?

No. Fixed mortgage deals are priced off swap rates rather than Bank Rate. The Committee records full and fast pass-through from short-term OIS rates to lending rates, noting the quoted rate on two-year fixed-rate mortgages was around 95 basis points higher than prior to the conflict. The average two-year fixed mortgage rate was 5.73 percent on 15 September 2026, up from 4.84 percent at the start of March 2026.

What does the decision mean for savers?

A hold keeps Bank Rate-linked easy access savings rates where they are. Fixed-rate bonds follow the same swap curve as fixed mortgages, so their pricing reflects the inflation outlook and the gilt reduction plan rather than the Bank Rate vote alone.