The Bank of England is expected to do the thing it hasn't done since August 2023 on Thursday: raise interest rates. Most analysts are predicting the benchmark rate will climb from 3.75% to 4%, a move that will make borrowing more expensive for individuals and businesses while giving savers something to smile about - assuming they can afford to smile after their mortgage payment.

The Bank rate has fallen from its 2023-24 peak of 5.25%, and the Monetary Policy Committee (MPC) has left it unchanged at its last six meetings. But rising inflation, driven primarily by the cost of petrol and diesel, is apparently the straw that broke the committee's patience. The announcement lands at 12:00 GMT on Thursday, giving everyone time to brace themselves over lunch.

Close attention will also be paid to any hints from the MPC about where rates go next. "The decision is increasingly less about whether rates reach 4% and more about what follows after that," said Chris Cheverall, head of UK at trading platform CMC Markets. "A quarter-point rise is already widely expected, but the Bank now has to balance inflation that is still too high against an economy where the growth outlook has weakened sharply." In other words: pick your poison, but do it with a straight face.

The Consumer Prices Index (CPI) measure of inflation is well below its peak of a few years ago but has been heading back up and is expected to go higher. It was 3.5% in the year to September 2026, up from 3.1% the previous month and comfortably above the central bank's 2% target - a target that is starting to feel less like a goal and more like a distant memory. The ongoing impact of the Iran war, primarily on the cost of energy and fuel, has filtered through to the UK inflation rate, and millions of domestic energy customers are braced for a hefty price rise in January.

The Bank's base rate is what it charges other banks and building societies to borrow money, which influences what they charge their own customers for mortgages as well as the interest they pay on savings. Were the rate to rise, there would be an immediate impact on the 510,000 tracker mortgage-holders. According to calculations by banking trade body UK Finance, a 0.25 percentage point rise would mean a £31 increase in monthly repayments for someone with a typical tracker home loan.

The 470,000 mortgage-holders on variable deals would need to wait for their lender's reaction. Typically, a 0.25 percentage point rise would mean a £14 increase per month in repayments. For those on fixed deals, the picture is more nuanced: their monthly payments are not immediately affected, but their future deals are, and lenders have already "priced in" the expected rise when quoting new deals.

As of 4 November, the average two-year fixed residential mortgage rate was 5.96%, while the average five-year rate stood at 5.99%, according to financial information service Moneyfacts. That means anyone rolling off a five-year deal faces a much bigger mortgage bill. Broker L&C said average mortgage rates offered by the 10 biggest lenders suggested some borrowers now faced paying almost £5,000 more each year in repayments on a £200,000 mortgage over 25 years than those who secured a remortgage deal in 2021. Five years ago, the average five-year fixed remortgage rate among the 10 biggest lenders was 1.30% - a number that now looks like a relic from a more innocent era.

Relatively high fixed rates have prompted some people to consider choosing trackers, in the hope that the rate would be lower, even if the Bank rate rises in the coming months. "The right choice ultimately depends on borrowers being confident they can stomach future rises. The devil is in the detail," said Rachel Springall from Moneyfacts. The cost of some other new loans could also be influenced by the Bank rate, while savers - on the flipside - could see the interest rates offered to them improve.

Ultimately, lenders - as well as policymakers at the Bank of England - are having to judge what may happen to the UK's economic outlook, which is highly connected to changes in international events. So, same as it ever was: watch this space, and maybe your mortgage payment too.