Bank Rate rises to 4%. Will my business loan repayments go up?

The Bank of England raised Bank Rate from 3.75% to 4% on Thursday 5 November 2026, the first rise in more than three years. According to the Monetary Policy Summary, the Monetary Policy Committee voted 8 to 1 for the quarter point increase, with one member wanting to go to 4.25%. If you run a business with a loan, an overdraft or a commercial mortgage, the first question is simple. Will my repayments go up? Here is what changed, which kinds of borrowing move with Bank Rate, what it costs in pounds, and what to do before you borrow or refinance. Smart Funding Solutions is a broker, not a lender. We compare whole of market options and arrange business finance from £10,000 to £20 million.

01Why did the Bank of England raise interest rates to 4%?

Inflation is heading the wrong way. CPI was 3.5% in September, and the Bank now expects it to rise to around 5% by the middle of 2027, mostly because of higher energy prices. The Committee raised rates to stop those costs feeding through into wages and other prices.

• The vote. Eight members voted for 4%. Catherine L Mann voted for a half point rise to 4.25%.
• The forecast. Staff projections put CPI at around 4½% in the first quarter of 2027 and around 5% in the second.
• The economy. The Bank said activity has held up better than expected, though growth is likely to slow in the coming quarters.
• Business lending. The minutes noted that growth in lending to businesses had remained strong.

The rise follows the September meeting, when three members already voted for 4%, as our report on Bank Rate held at 3.75% explained. The ONS inflation release for September shows the latest price figures, and our September inflation report sets out what is behind them.

02Will interest rates go up again?

Possibly. The Bank said policy "is not on a pre-set path" and that it will adjust Bank Rate as necessary to bring inflation back to the 2% target in the medium term. Some members signalled that further rises may be needed if the data warrant it, while Alan Taylor described this move as insurance rather than the start of a run of increases.

The next decision is due on Thursday 17 December 2026, according to the Bank's 2026 meeting dates. Our preview of today's meeting, what a rise to 4% means for business loans, shows why most economists expected this rise, and the Credit Conditions Survey for the third quarter shows how lenders were already pricing risk.

03Which business loans go up when Bank Rate rises?

Only borrowing with a rate that moves. Check your agreement for the words variable, tracker or base rate plus a margin.

• Likely to rise. Variable rate bank loans, overdrafts, tracker commercial mortgages, many revolving credit facilities and most invoice finance facilities, whose discount charge is usually set over base rate.
• Usually fixed. Fixed rate term loans, most hire purchase and finance lease agreements already signed, and many unsecured business loans.
• Not linked to Bank Rate. A merchant cash advance uses a fixed fee agreed at the start, so the cost of an existing advance does not change.

New deals are a different matter. Lenders price new loans off their own funding costs, so quotes on fixed rate products can move even before your existing loan does.

04How much more will my business loan cost at 4%?

A quarter point rise adds £250 a year in interest for every £100,000 of variable rate borrowing that tracks Bank Rate, before any change in the lender's margin. As a rough guide, that works out like this.

• £50,000 variable loan. About £125 a year, or around £10 a month.
• £250,000 overdraft or revolving facility, fully drawn. About £625 a year, or around £52 a month.
• £1 million tracker commercial mortgage. About £2,500 a year, or around £208 a month.

For context, the Bank's Money and Credit release put the average rate on new bank loans to small and medium sized businesses at 6.55% in September. Run your own figures with the business loan calculator or the commercial mortgage calculator, and see what a business loan really costs once fees are added.

05Should I fix my business loan rate now?

It depends on how long you need the money and how much certainty your budget needs. A fixed rate protects you if rates rise again, but fixed deals can carry an early repayment charge if you clear the loan early. A variable rate suits a short facility you expect to repay soon, or a business that would gain if rates fall later.

• Compare the options in our business loan interest rate guide and the business finance rate index.
• If you have several variable debts, debt consolidation can roll them into one fixed repayment.
• If your current deal is expensive, refinancing a business loan may cut the total cost even after the rise.

A quarter point rise adds £250 a year in interest for every £100,000 of variable rate borrowing that tracks Bank Rate, before any change in the lender's margin.

06Can I still get a business loan when interest rates go up?

Yes. Lenders keep lending when rates rise, and the Bank noted that business lending growth has stayed strong. What changes is affordability. Lenders test whether your profits cover the repayments with room to spare, so a higher rate can lower the amount they will offer. Our guide to how much your business can borrow and the DSCR calculator show how that test works, and the glossary explains interest cover.

A cash flow forecast that already allows for the higher rate makes a stronger case. If your bank says no, read what to do after a declined business loan.

07What can businesses do to manage higher borrowing costs?

• Speed up cash coming in. Invoice finance and better credit control reduce how much you need to borrow. See chasing late payment.
• Spread tax bills. VAT loans and Time to Pay or a tax loan can be cheaper than a stretched overdraft.
• Use your assets. Secured business loans and asset refinancing often price below unsecured borrowing.
• Cover short gaps cheaply. Working capital loans work best when the purpose and the repayment date are clear.

Service firms facing higher costs will find more in our report on the October 2026 services PMI, and manufacturers in our post on the October 2026 manufacturing PMI.

08What does the rate rise mean for your funding?

For most small businesses the rise itself is modest, a few pounds a month on a typical loan. The bigger risk is staying on an expensive or poorly matched facility while rates climb. Check which of your debts are variable, decide whether a fixed rate makes sense, and compare the market before you renew or borrow more, because the gap between lenders is usually far larger than a quarter point.

Use Instant Quotes to see which lenders could fit your business in minutes, or talk to a broker about refinancing or new borrowing.