On 5 November 2026, the Bank of England raised interest rates for the first time since 2023, from 3.75% to 4%. For business owners, the Bank of England interest rate rise lands at the same time as the Autumn Budget changes that start in April 2027, including a higher minimum wage and more tax on landlords’ rental profit. On their own, each change looks small. Together, they can add thousands of pounds a year to the cost of running a business.
This guide explains why rates went up, how lenders decide what your business pays, what the rise costs on a typical loan, and the checks to make before you take on new borrowing.
Key numbers at a glance
1. Why the Bank of England raised rates
The Bank’s Monetary Policy Committee voted 8 to 1 to raise the base rate by 0.25 percentage points. One member voted for a larger rise to 4.25%. It is the first increase since August 2023 and reverses the run of cuts businesses had been planning around.
- Inflation is rising again: consumer price inflation reached 3.5% in September 2026, up from 3.1% in August, with fuel costs the biggest driver.
- Energy costs: the conflict in the Middle East has pushed up energy prices, and the Bank expects inflation to peak at around 4.9% in mid-2027.
- A resilient economy: the economy grew faster than expected, giving the Bank room to raise rates.
2. How lenders decide what your business pays
The base rate is only part of the price of a business loan. Lenders add a risk margin on top, and that margin depends on how risky they think your business is:
Your interest rate = Bank of England base rate + your risk margin
Lenders usually look at five things when setting your margin:
- Trading history: how long, and how steadily, you have traded.
- Profits and cash flow: whether the business can comfortably afford the repayments.
- Credit record: the credit history of the business and its directors.
- Security offered: property, other assets or personal guarantees.
- Your sector: how risky the lender believes your industry is.
3. Same loan, different price
Two businesses each want to borrow £150,000. The base rate is the same for both, but their margins are not.
| Business A: established firm | Business B: newer business | |
|---|---|---|
| Profile | Strong accounts, long trading history | Thinner profits, less security |
| Base rate | 4% | 4% |
| Risk margin (example) | 3% | 6% |
| Interest rate | 7% | 10% |
| Interest a year on £150,000 | About £10,500 | About £15,000 |
4. What the rise costs on a variable-rate loan
If your loan or overdraft is on a variable rate, every base-rate rise passes straight through to your repayments. On a £150,000 variable-rate loan:
| Rate change | Extra interest a year |
|---|---|
| +0.25% (this rise) | £375 |
| +1% | £1,500 |
| +2% | £3,000 |
If you are on a fixed rate, nothing changes until your deal ends. But if it ends in the next year or two, you may refinance at a higher rate than you planned for.
5. Then add the Autumn Budget
The rate rise comes on top of changes announced in the Autumn Budget 2026 that start in April 2027:
- Wages: the minimum wage for workers aged 21 and over rises from £12.71 to £13.21 an hour from 1 April 2027. For someone working 30 hours a week, that is about £780 more a year, or about £897 with 15% employer National Insurance.
- Your premises: from 6 April 2027, landlords who own property in their own name will pay more tax on rental profit (24%, 44% or 49%, up from 20%, 40% and 45%). That is 4p more tax on every £1 of rental profit. With their borrowing costs also rising, some landlords may try to pass these costs on through higher rents.
6. The combined impact: an example
Take a café with 10 staff on 30 hours a week, a £150,000 variable-rate loan and £30,000 a year in rent:
| Cost | Extra a year |
|---|---|
| Wages: 10 staff × about £897 | £8,970 |
| Interest: +0.25% on £150,000 | £375 |
| Rent: if the landlord raises it by 5% (example) | £1,500 |
| Total extra cost a year | £10,845 |
That is nearly £11,000 a year in extra costs before the café changes a single price, and more if rates rise again.
7. Before you take a big loan: four checks
- Run the numbers: include the new wage rates, your rent and current interest costs in your budget for 2027 to 2028.
- Stress-test the rate: check what happens if rates rise another 1% to 2% over the life of the loan.
- Check your cash flow: make sure you can cover repayments in a slow month, not just an average one.
- Strengthen your accounts: up-to-date, accurate accounts and forecasts reduce the lender’s risk, which can mean a smaller margin.
Practical scenarios
Scenario 1: The growing firm comparing two loan offers
A business with three years of steady trading is offered £150,000 at 7% by one lender and 9% by another.
The result: the 2% difference is worth about £3,000 a year. With up-to-date accounts and a clear cash-flow forecast, the business has a strong case to negotiate the higher offer down.
Scenario 2: The fixed-rate deal ending in 2027
A company fixed its £200,000 loan at 5% in 2022, and the deal ends in summer 2027.
The result: if it refinances at 7.5%, its interest rises by about £5,000 a year. Planning now, by comparing lenders and modelling the higher cost, gives it time to adjust prices or build a cash buffer.
Scenario 3: The newer business planning to borrow
A business that has traded for 18 months wants £80,000 to expand, but its accounts are a year behind.
The result: lenders may see it as higher risk and charge a bigger margin. Bringing the accounts up to date and preparing a 12-month forecast before applying could reduce the rate it is offered.
Frequently asked questions
Will my business loan repayments go up?
If your loan or overdraft is on a variable rate, or tracks the base rate, yes, usually from your next payment period. If you are on a fixed rate, your repayments stay the same until the fixed period ends.
Will interest rates rise again?
Possibly. The Bank says its decisions depend on the data, and ACCA has warned of the risk of another rise early in 2027 if energy prices stay high. The next decision is on 17 December 2026.
Should I fix my business loan now?
It depends on your loan, your cash flow and the fees involved. Fixing gives certainty, but early repayment charges and arrangement fees can outweigh the benefit. Compare the total cost over the loan term before deciding.
How can I get a lower rate from a lender?
Reduce the lender’s risk: keep your accounts and forecasts up to date, show steady cash flow, keep a clean credit record and, where appropriate, offer security.
Related reading: Autumn Budget 2026: What It Means for Households and Businesses
Key takeaways
- The Bank of England raised the base rate from 3.75% to 4% on 5 November 2026, and another rise is possible.
- Your loan rate is the base rate plus a risk margin, and your accounts and cash flow shape that margin.
- Every 1% rise costs £1,500 a year on a £150,000 variable-rate loan.
- Add the April 2027 wage rise and possible rent increases to your plans, not just interest costs.
- Before borrowing, run the numbers, stress-test the rate, check your cash flow and strengthen your accounts.
How Credora can help
We help UK businesses of all sizes and sectors plan for higher costs and borrow with confidence:
- Stress-test your plans: we model your costs and cash flow if rates rise by 1% or 2%.
- Prepare for lenders: we bring your accounts and forecasts up to date, so you can show lenders a lower-risk business.
- Compare your options: we help you weigh up loan offers, fixed and variable rates, and the total cost of borrowing.
- Budget for 2027: we build in the new wage rates, rent changes and interest costs.
- Ongoing support: as your part-time finance director (Fractional CFO), we keep your cash plan on track as conditions change.
Book a free consultation and we will stress-test your loan, your cash flow and your 2027 costs before you sign.
Book your free consultationOr email us at enquiries@credoraconsulting.co.uk
General information, not financial advice. This article reflects the Bank of England’s decision of 5 November 2026 and the Autumn Budget 2026 announcements. Rates, forecasts and proposals can change. Lender margins and the examples in this article are illustrative. Please take advice on your own circumstances before borrowing.
Sources: Bank of England, Monetary Policy Summary and November 2026 Monetary Policy Report; Accountancy Age, “Bank of England raises interest rates to 4% as ACCA warns further hikes could follow” (6 November 2026); Credit Connect, “Interest rates hit 4%: commercial credit reaction”; HM Treasury, Autumn Budget 2026; Credora Consulting, Autumn Budget 2026: What It Means for Households and Businesses.