Will interest rates go up? UK inflation rises to 3.5% in September 2026

This article is for business owners asking whether interest rates are about to go up, and what rising inflation means for the cost of their borrowing. The Office for National Statistics (ONS) published its consumer price inflation figures for September 2026 on 21 October 2026. Below we set out what they show, what could happen to Bank Rate on 5 November and how to plan your funding. Smart Funding Solutions is a broker, not a lender: we compare whole-of-market options across 300+ lenders, arranging funding from £10,000 to £20 million.

01What is the UK inflation rate now?

According to the ONS consumer price inflation bulletin for September 2026, the Consumer Prices Index (CPI) rose by 3.5% in the 12 months to September 2026, up from 3.1% in August. CPIH, the wider measure that includes owner occupiers' housing costs, rose by 3.6%, up from 3.3%.

• Monthly change: CPI rose 0.4% in September 2026, compared with little change in September 2025.
• Core inflation: CPI excluding energy, food, alcohol and tobacco rose to 2.8%, up from 2.6%.
• Services and goods: services inflation rose to 3.7% from 3.4%, and goods inflation to 3.2% from 2.7%.
• Food: food and non-alcoholic drink inflation was unchanged at 1.3%.

02Why has inflation gone up?

Mainly fuel. The ONS said transport, particularly motor fuels, made the largest upward contribution to the change. The average price of petrol rose by 8.2 pence a litre between August and September to 169.5p, and diesel rose by 10.7 pence to 192.5p a litre. Restaurants and hotels pulled the other way: prices in that division rose 3.8% over the year, down from 4.1% in August, as hotel prices rose more slowly than a year earlier.

For firms that run vans, lorries or machinery, that is a direct rise in costs. Our report on diesel prices and what they mean for hauliers looks at transport businesses in detail, and transport and logistics finance sets out the funding options.

03Will interest rates go up in November?

Nobody can say for certain until the Bank of England's Monetary Policy Committee announces its decision on 5 November 2026, alongside its next Monetary Policy Report, according to the Bank's published timetable for 2026. What we do know:

• At its September meeting, the Bank held Bank Rate at 3.75% by six votes to three, with three members voting to raise it to 4%.
• In September the Bank expected CPI inflation to rise to around 3.75% in the last quarter of 2026 and to slightly above 4% in early 2027, and judged the risks to inflation to be tilted to the upside.
• Governor Andrew Bailey, who voted to hold, said that if the Middle East conflict persists, policy may have to tighten.
• Some forecasters already expect a rise: Bloomberg Economics, for example, expects a 0.25 percentage point increase in November.

Inflation is one of several things the Committee weighs, alongside wages, growth and how far price rises are spreading through the economy. Our post on Bank Rate being held at 3.75% explains how the September decision was reached.

04What would a rate rise mean for my business loan?

It depends on how your borrowing is priced:

• Variable-rate loans and overdrafts priced over Bank Rate usually cost more soon after a rise. A 0.25 percentage point rise adds about £250 a year in interest for every £100,000 borrowed on a variable rate.
• Fixed-rate loans already agreed keep their rate for the fixed term, so your repayments do not change.
• New fixed-rate offers can move before the Bank decides, because lenders price on their own funding costs and what markets expect.
• Revolving credit facilities, invoice finance and other facilities that charge a margin over base rate usually follow Bank Rate.

Our guide to business loan interest rates explains how lenders set pricing, and our business finance rate index shows typical rates by product.

05Should I borrow now or wait?

If you already know you need funding, waiting for a decision that could push rates up rarely helps. A few points to weigh:

• Fixed or variable: a fixed rate gives you certain repayments if rates rise, while a variable rate would fall again if inflation eases and the Bank cuts.
• Check what you already owe: if your current loans are on variable rates, see whether refinancing onto a fixed rate makes sense once any early repayment charges are counted.
• Plan for higher costs: build higher fuel, energy and wage bills into your cash flow forecast before you apply, so the amount you ask for is realistic.

Lenders judge each application on your own trading, affordability and credit history, not on the headline inflation rate. Our guide to how lenders assess business loan applications sets out what they check.

06Funding options while costs are rising

• Working capital loans cover the gap between paying higher bills and getting paid.
• A revolving credit facility lets you draw and repay as costs move, paying interest only on what you use.
• Invoice finance releases cash tied up in unpaid invoices.
• Asset finance spreads the cost of vehicles and equipment, often at a fixed rate.

The Autumn Budget could also change the tax bills you need to plan for. If a VAT or tax bill is coming, our guide to Time to Pay or a tax loan compares the two main ways to spread it.

If you already know you need funding, waiting for a decision that could push rates up rarely helps.

07What to watch next

The Bank of England announces its next decision on 5 November 2026. The ONS lists its next consumer price inflation release, covering October, for 18 November 2026. For the wider picture, our report on August GDP covers how the economy is growing.

If you want funding in place before rates move, get your Instant Quotes to see your lender matches instantly, with no credit check. Lenders make every decision, and all finance is subject to status.