Quick answer
The Bank of England announced on 17 September 2026 that it was holding Bank Rate at 3.75%, but three of the nine members of its Monetary Policy Committee voted to raise it to 4%. Inflation was 3.1% in August and the Bank expects it to rise further, driven by energy prices. The next decision is on 5 November 2026. For bridging and development borrowers, the main risks are the cost of variable-rate loans and, more often, the mortgage rate at the exit: the Bank noted that quoted two-year fixed mortgage rates had risen by around 0.95 percentage points since the Middle East conflict began. Fixing the rate where you can and testing your exit at a higher rate are sensible steps.
What the Bank of England decided
Bank Rate was cut to 3.75% in December 2025. In its September 2026 Monetary Policy Summary, published on 17 September, the Monetary Policy Committee voted by 6 to 3 to keep it there. Megan Greene, Catherine L Mann and Huw Pill voted for a quarter point rise to 4%.
The reason is inflation. CPI inflation rose to 3.1% in August, and the Bank said it is likely to rise further over the coming quarters, to around 3¾% in the last quarter of 2026 and slightly above 4% in early 2027. The Bank linked this mainly to higher energy prices following the conflict in the Middle East, and judged the risks to inflation to be tilted to the upside. The Committee said it "stands ready to act as necessary".
The next decision is due on 5 November 2026, just over a week after the Autumn Budget.
Markets have already moved
Even without a change in Bank Rate, borrowing has become more expensive. The minutes describe "full and fast pass-through" from higher short-term market rates to key lending rates. They note that the quoted rate on two-year fixed-rate mortgages was around 95 basis points higher than before the conflict, and that markets saw a higher chance of near-term rises in Bank Rate.
Lenders price from their own cost of funds, not just from Bank Rate, so moves in market rates feed through to new offers before the Bank acts. That is why a hold can still mean dearer finance.
How rates reach a bridging loan
Bridging is priced as a monthly rate, and the average term in the Bridging Trends figures is 12 months, so a change in rates affects a much shorter period than it does on a mortgage. The latest Bridging Trends figures for the second quarter put the average monthly rate at 0.81%, slightly down on the quarter before. That reflects deals completed between April and June, so it does not yet show the most recent moves in market rates.
What to check on any offer:
- Fixed or variable. Some lenders fix the monthly rate for the term; others charge a margin over a reference rate, so a rise in rates raises your interest bill. Our guide to bridging loan interest rates explains the difference.
- Retained or serviced interest. With retained interest the lender sets aside the interest for the term at the start, so you know the cost upfront. See how much a bridging loan costs for how this works.
- The extension terms. If your exit runs late, the rate on any extension may be set at that time, not today.
Development finance: watch the build period
Development loans run for longer, often well over a year, and interest is charged as funds are drawn. A higher rate during the build adds to total finance costs and reduces profit. If the facility is on a variable rate, run your development appraisal with the rate higher than today and see whether the scheme still works. Our guide to ROCE and the true cost of development finance shows how to compare offers on total cost rather than headline rate.
At the end of the build, a development exit loan can repay the build lender while units sell. If sales slow and rates rise together, that bridge buys time, but it needs to be planned before the build facility ends rather than in its last few weeks.
The bigger risk: your refinance exit
For many investors, the rate that matters most is not the bridge but the buy-to-let or commercial mortgage that repays it. Term lenders test whether the rent covers the mortgage payments at a set rate, so a higher mortgage rate can mean a smaller loan. If you plan to refurbish, let and refinance, check what loan the rent will support at today's rates, and then at a higher one.
Our guide to refinancing a bridging loan onto a mortgage covers how term lenders assess the property, and bridge-to-let options agree both loans together at the start.
What to do now
- Ask whether the rate on an offer is fixed for the term, and get it in writing.
- Test your exit at a higher mortgage rate and a longer sale period.
- Allow more time for refinancing, as term lenders reprice when market rates move.
- Compare lenders on total cost: interest, arrangement fee, exit fee and any extension terms.
We search the market across bridging and development lenders and approach those whose terms suit your plan. See how our development finance broker service works, or start with Instant Quotes.
Common questions
What is the Bank of England base rate now?
Bank Rate is 3.75%. The Bank announced on 17 September 2026 that it was holding it at that level, with six members voting to hold and three voting to raise it to 4%.
When is the next Bank of England rate decision?
5 November 2026, just over a week after the Autumn Budget on 28 October.
Do bridging loan rates follow the base rate?
Not directly. Many bridges are priced as a fixed monthly rate set by the lender from its own cost of funds. Some are variable and track a reference rate. Check which applies before you accept an offer.
How do higher rates affect a development finance exit?
Higher mortgage rates can reduce what a term lender will lend against the rent, and slower sales can extend the time you hold the units. Test the exit at a higher rate before you commit.
This article reports news and published figures as at 17 October 2026. It is for general information only and is not legal, tax or financial advice. Bridge & Build Finance is a commercial finance brokerage service, not a lender. Finance is subject to status, lender criteria, valuation, underwriting and approval.
