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What Bank Rate at 4% Means for Small Business Borrowing in 2026

The Bank of England raised Bank Rate to 4% on 5 November 2026, its first rise since 2023. Here is how the rate feeds into loans, overdrafts and commercial mortgages, and what to check now.

By Entrepreneur Group · Published 5 August 2026 · Updated 5 November 2026

Editor's note: updated on 5 November 2026 with the Bank of England's decision to raise Bank Rate to 4%. Previously updated on 27 October 2026.

Bank Rate is 4%. The Bank of England's Monetary Policy Committee raised it from 3.75% on 5 November 2026 by an 8-1 vote, with Catherine L Mann preferring a rise to 4.25%, according to the Bank's November summary as reproduced by ActionForex. It was the first rise since 2023. Rates had been held at 3.75% on 30 July and 17 September 2026. The next decision is on 17 December 2026.

For small businesses, that means borrowing on variable rates is likely to get more expensive. Inflation was 3.5% in September, well above the 2% target, and the Bank now expects it to reach about 5% in the second quarter of 2027. Read our full report on the November decision.

How Bank Rate reaches your business

Bank Rate is the rate the Bank of England pays on reserves held by commercial banks. Changes to it feed through to what banks charge their customers, but the effect on your business depends on your contracts.

• Variable-rate loans and overdrafts: these are often priced as Bank Rate or a reference rate plus a margin. A rise in Bank Rate usually raises your repayments soon after.
• Fixed-rate loans: your rate does not change until the fixed period ends. The risk comes at refinancing.
• Commercial mortgages: may be fixed, variable or tracker. Check which you have and when any fixed period ends.
• Asset and invoice finance: pricing varies by lender. Read the agreement to see how rates are set.

Why the Bank raised rates

Back in July the committee held rates. The July minutes explain the committee's thinking. Energy prices linked to the Middle East conflict remained high and volatile. The majority judged that borrowing costs had already risen enough to give some protection, and wanted more evidence before acting. Megan Greene, Catherine L Mann and Huw Pill voted for 4%, worried that higher energy costs would feed into wages and prices.

Since then, inflation has risen from 2.6% in June to 3.5% in September, driven mostly by motor fuel, according to the ONS. Core inflation, which strips out energy and food, was 2.8%.

In November the committee said energy costs had added about 1 percentage point to September's inflation and that the risk of them spreading into wider prices and wages was rising. It said: "Monetary policy is not on a pre-set path." InvestingLive reported that markets were pricing roughly a 50% chance of another rise in December. We cannot predict future decisions.

What to check now

This section is general information, not financial advice. Take qualified advice before changing any finance arrangement.

• List your borrowing. For each loan, overdraft or mortgage, note the rate, whether it is fixed or variable, and when it ends or renews.
• Run a sensitivity test. Work out what your monthly repayments would be if rates rose by 0.25 and 0.5 percentage points.
• Check your covenants. Some loans require you to keep certain financial ratios. Higher interest costs could put you closer to those limits.
• Plan refinancing early. If a fixed deal ends in the next year, start talking to lenders months in advance.
• Use savings well. If you hold cash, higher rates mean business savings accounts can earn more. Compare what your bank pays.

Frequently asked questions

What is the Bank of England base rate now?

Bank Rate is 4%. It was raised from 3.75% on 5 November 2026 by an 8-1 vote, with one member preferring 4.25%.

When is the next Bank of England interest rate decision?

The next Monetary Policy Committee decision is on 17 December 2026.

Will UK interest rates go up again?

Nobody knows. The committee says policy is not on a pre-set path, and several members indicated further rises could be needed depending on energy prices and wage and price data.

Sources

1. Bank of England: Monetary Policy Summary and minutes, July 2026 (reviewed 27 October 2026)
2. Bank of England: Monetary Policy Summary and minutes, September 2026 (reviewed 27 October 2026)
3. Bank of England: Interest rates and Bank Rate (reviewed 27 October 2026)
4. ONS: Consumer price inflation, UK: September 2026 (reviewed 27 October 2026)
5. ActionForex: BoE Bank Rate increased to 4%, November 2026 Monetary Policy Summary (5 November 2026) (reviewed 5 November 2026)
6. InvestingLive: Bank of England raises the Bank Rate to 4.00% (5 November 2026) (reviewed 5 November 2026)
7. Bank of England: Monetary Policy Committee dates for 2026 and 2027 (reviewed 5 November 2026)
8. Global Banking & Finance Review (Reuters): UK services growth hits eight-month high in October (4 November 2026), on the expected first rise since 2023 (reviewed 5 November 2026)