Inflation rises to 3.5%: will interest rates go up, and what does it mean for bridging?

By the Bridge & Build Finance team · 22 October 2026

What did the September inflation figures show?

The ONS consumer price inflation release, published on 21 October, showed:

• CPI inflation: 3.5% in the 12 months to September, up from 3.1% in August. Prices rose 0.4% in the month alone.
• Core inflation: excluding energy, food, alcohol and tobacco, 2.8%, up from 2.6%.
• Services inflation: 3.7%, up from 3.4%. Goods inflation rose from 2.7% to 3.2%.
• The main cause: transport, particularly motor fuels. Fuel prices were 29.8% higher than a year earlier.
• Housing costs: owner occupiers' housing costs rose 4.0% over the year, and CPIH, the measure that includes them, was 3.6%.

The ONS also reported, in a separate release published alongside it, that average UK private rents rose 3.8% in the year to September, to £1,406 a month, while house price growth slowed to 0.9%. Our house prices report has the detail.

Will the Bank of England raise interest rates in November?

No one can say for certain. Bank Rate is 3.75%. In its September Monetary Policy Summary, the Monetary Policy Committee voted 6 to 3 to hold, with three members voting for a rise to 4%. The Bank expected inflation to rise to around 3¾% in the last quarter of 2026 and slightly above 4% in early 2027, and said it "stands ready to act as necessary".

September's figure was a large jump in a single month. The next decision is on 5 November, a week after the Autumn Budget on 28 October. Our report on the September Bank Rate decision explains how a change in Bank Rate reaches bridging and development finance.

Why are mortgage rates going up before the Bank acts?

Lenders price from their own funding costs, which follow market expectations of future rates. Those expectations have moved first:

• Rightmove's October figures put the average two-year fixed mortgage rate at 5.55%, up from 5.29% a month earlier and 4.25% before February, as reported by The Intermediary.
• Moneyfacts found the average mortgage product now stays on sale for just 13 days, down from 14 the month before and 43 days in 2019, according to Mortgage Solutions. Adam French, head of consumer finance at Moneyfacts, said "the deals available today may not be here tomorrow".

For an investor who plans to refinance a bridge onto a buy-to-let or commercial mortgage, that means the exit can get more expensive while the works are still going on.

What does it mean for bridging and development finance?

• Bridging rates. Bridges are priced as a monthly rate over a short term, and many lenders fix that rate for the term. Check whether your offer is fixed or variable. Our guide to bridging loan interest rates explains the difference, and our rates and costs data page shows typical pricing across the panel.
• Refinance exits. Buy-to-let lenders test whether the rent covers the mortgage payments at a set rate, so a higher rate can mean a smaller loan. Rents are still rising, which helps, but run the numbers at today's rates. See refinancing a bridging loan onto a mortgage, and our report on buy-to-let yields.
• Development finance. Interest builds up as funds are drawn over a longer build. Run your development appraisal with a higher rate and a longer sales period, and plan a development exit loan before the build facility ends if sales are slow.

What should you do before 5 November?

• Get offers in writing, and ask whether the rate is fixed for the term.
• If you are relying on a refinance, ask a term lender now what the rent will support. Bridge-to-let options agree both stages at the start.
• Allow extra time. With mortgage products being repriced every couple of weeks, a decision in principle can expire before you are ready. Our guide to a decision in principle explains what one commits a lender to.
• Compare lenders on total cost, not just the monthly rate.

We search the market and approach the lenders on our panel whose terms fit your plan, so you can see your options before the next decision.

Common questions

This article reports news and published figures as at 22 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.