The Bank of England has raised interest rates, lifting Bank Rate from 3.75% to 4% on 5 November 2026. If you already have car finance, this probably doesn’t change your payments. If you’re about to take out new finance, it could make deals a little more expensive. Here’s what the rise means and what you can do.
In short
Bank Rate rose from 3.75% to 4% on 5 November 2026. Most HP and PCP agreements have a fixed rate, so your monthly payments won’t change. New car finance could become slightly more expensive, but a 0.25 point rise adds only a pound or two a month on a typical deal. Your credit history, deposit and term matter much more.
What the Bank of England decided
The Monetary Policy Committee voted 8–1 to raise Bank Rate by 0.25 percentage points to 4%. The one member who disagreed wanted a bigger rise, to 4.25% (Bank of England, November 2026).
The main reason is inflation. Consumer prices rose by 3.5% in the year to September, well above the 2% target, pushed up by higher energy prices. The Bank expects inflation to rise further, to around 4½% in early 2027 and around 5% in spring 2027, before falling.
The Bank says policy is “not on a pre-set path” and it will decide at each meeting. Some members have signalled that further rises are possible, so rates on new finance are more likely to stay where they are or rise than fall in the short term.
Does it affect my existing car finance?
Usually not. HP and PCP agreements almost always have a fixed interest rate for the whole term, so your monthly payments stay the same.
Some personal loans and business finance products have variable rates. Check your agreement if you’re not sure.
Will new car finance cost more?
Car finance APRs don’t move in step with Bank Rate. They also depend on the lender’s funding costs, competition between lenders and manufacturer offers. But a rise in Bank Rate can push up the rates offered on new deals over time.
Worked example
On a £15,000 loan over 48 months, an APR rise from 9.9% to 10.15% (an extra 0.25 points) changes the monthly payment from about £376.68 to about £378.33. That’s around £1.65 a month, or about £79 over the whole term.
Try your own figures in the car finance calculator.
What you can do
- Already have finance? Nothing changes if your rate is fixed. If you were planning to settle early, the rise doesn’t affect your settlement figure.
- Getting new finance? Compare the APR and the total amount payable, not just the monthly payment.
- Look at manufacturer offers. Subsidised deals, often on electric cars, are less tied to Bank Rate.
- Check your credit file and use soft-search eligibility checkers before applying. Your credit history affects your rate far more than a 0.25 point change in Bank Rate. See what credit score you need.
- Keep the term as short as you can afford. A longer term lowers the monthly payment but increases the interest you pay.
Interest rate rise FAQs
Will my car finance payments go up?
Not if your agreement has a fixed rate, which most HP and PCP agreements do. Check your agreement if you have a variable-rate loan.
How much more will new car finance cost?
Not much from this rise alone. A 0.25 point higher APR adds around £1 to £2 a month on a typical £15,000 deal over four years. Lenders set rates based on many factors, so the effect varies.
Should I take out car finance now or wait?
It depends on your circumstances more than on Bank Rate. If you need a vehicle, focus on a deal you can comfortably afford with the lowest total cost. Some Bank members have said further rises are possible, but nobody knows for sure.
Why did the Bank of England raise rates?
To bring inflation back down towards its 2% target. Inflation was 3.5% in September, and the Bank expects it to rise further in early 2027, mainly because of higher energy prices.
Sources: Bank of England, November 2026 Monetary Policy Summary, Bank of England: interest rates and Bank Rate.