London Daily

Focus on the big picture.
Thursday, Sep 24, 2026

Bank of England: Five things we now know about the UK economy

Bank of England: Five things we now know about the UK economy

The outlook for the UK's economy is fairly bleak.

The Bank of England raised interest rates again on Thursday and has warned the UK is heading for its longest recession since the 1930s Great Depression.

Here are five things we learned from the central bank about the future of the economy.

1. UK set for two-year recession


The UK is facing its longest recession on record, with the Bank of England warning the country faces a "very challenging" two-year slump.

When a country is in recession, it's a sign that its economy is doing badly. A recession is when a country's economy shrinks for two three-month periods in a row.

This has been forecast in the UK for some time due to the prices of goods such as food, fuel and energy soaring, which is down to several factors, including the war in Ukraine.

Previously, the Bank had expected the UK to fall into recession at the end of this year and said it would last for all of next year.

But now it thinks the economy already entered a recession this summer, and predicts it will continue next year and into the first half of 2024.

2. Unemployment rate to nearly double


Typically when a country is in recession, companies make less money and the number of people unemployed rises.

Graduates and school leavers also find it harder to get their first job.

The unemployment rate in the UK is set to rise significantly over the next two years to 6.4%, the Bank predicts.

Currently, the jobless rate is at 3.5%, its lowest level since 1974, thanks to a jobs boom as the economy started to recover from the pandemic.

But experts were already warning that the tide might be starting to turn due to the number of job vacancies falling in recent months.


3. Some mortgages could rise by £3,000 a year


Many homeowners will probably face higher mortgage repayments in the next two years, the Bank said.

Mortgage rates have been rising and those on fixed-rate deals, which make up about 80% of mortgages, will face an increase in repayments when their fix comes to an end.

Annual payments could soar by £3,000 in some cases, according to the Bank.

But with the latest hike in interest rates from the central bank widely expected, many lenders "priced in" the rise by raising their mortgage rates in advance.

According to Simon Gammon, managing partner at mortgage advisers Knight Frank Finance, most lenders are offering fixed rates of between 5.5% and 6%, so he says further rises would come as a surprise.

Those on tracker or variable rate mortgages will see their monthly payments go up with any future rate rises from the Bank of England.


4. Inflation to slow down next year


The inflation rate is a measure of the increase in the price of something over time.

For example, if a loaf of bread costs £1 and it goes up to £1.05 a year later, then bread inflation is 5%.

Inflation hit 10.1% in September, is expected to peak at 11% this winter, before falling next year.

The Bank's target is to keep inflation at 2%.


5. Interest rates won't go up as much as previously expected


The Bank of England puts up interest rates to try to control inflation. The idea is that people will be discouraged from borrowing and in turn have less money to spend, leading to prices rising more slowly.

With inflation expected to fall next year, the Bank does not expect interest rates to rise by as much as predicted.

November's interest rate rise takes the current rate to 3%.

Further rises are on the way - so borrowing on credit cards, loans and mortgages will still get more expensive - but they won't hit the 5.25% that financial markets had predicted.

Analysts now think they could peak at around 4.75% next year.

Newsletter

Related Articles

0:00
0:00
Close
Royal Navy Commandos Complete Maritime Operations Training With US Navy SEALs
Vistry Profit Warning Adds to Concerns Over UK Housebuilding Conditions
UK Commits £343 Million to Major Expansion of Community Mental Health Services
Five Eyes Partners Back UK-Led Campaign Against Global Fraud Networks
UK Businesses Gain Full Access to £13 Trillion CPTPP Trading Bloc
UK Allocates Nearly £10 Billion for Council, Social and Affordable Housing
Chancellor John Healey Unveils Deregulation Drive to Accelerate UK Investment and Growth
Prime Minister Andy Burnham Sets Out Post-Brexit Foreign Policy Vision at United Nations
UK Reassesses Chagos Arrangements as Burnham Seeks New Path on Diego Garcia
Key Trends to Watch
Government’s “Buy British” Procurement Push Targets More Domestic Jobs and Industrial Capacity
Scotland Launches Four-Year Flood Resilience Programme With New Community Funding
Low-Income Renters Face Record Gap Between Housing Support and Private Rents
UK and US Test Torpedo Launch From British Undersea Drone in Defence Technology Milestone
Britain Pushes Artificial Intelligence Security Onto United Nations Security Council Agenda
Treasury Committee Defends Office for Budget Responsibility Independence Amid Fiscal Pressure
Scotland Records Eleven Per Cent Rise in Drug-Use Deaths as Cocaine and Nitazenes Drive Concern
Welsh Government Sets Four-Year Programme Around Health, Living Costs, Jobs and Housing
Study Finds Most People With High Blood Pressure in England Remain Undiagnosed
Britain Plans First National Workplace Health System to Tackle Economic Inactivity
England to Introduce Vocational GCSEs in Major Secondary Education Reform
UK Elevates Climate and Nature Risks to National Security Priority
Andy Burnham and Donald Trump Put Trade at Centre of First Major Bilateral Meeting
Andy Burnham and Ursula von der Leyen Push Ahead With Closer UK-European Union Economic Ties
UK Government Borrowing Jumps to Eighteen Point Three Billion Pounds Ahead of October Budget
Piddington Residents Back Symbolic Independence Vote Over Asylum Accommodation Plan
Reform UK Names Helen Jenner as New Leader in Wales
England Expands Devolution of Transport, Skills and Economic Development Powers
Liberal Democrats Call for Temporary Fuel Duty Cut to Ease Cost-of-Living Pressure
UK Farmers Warn Drought Has Caused Crop Failures and Reduced Harvests
UK Fixed Mortgage Rates Approach 6% as Lenders Raise Borrowing Costs
YouGov Poll Puts Labour at 23% With Conservatives and Reform UK on 21%
Badenoch Presses Burnham to Increase Defence Spending and Cut Welfare Costs
UK Military Figures Warn of Growing Threats to Undersea Infrastructure and National Readiness
BP Moves Ahead With Sale of UK North Sea Oil and Gas Business
UK and ASEAN Endorse New Framework for Trade and Economic Cooperation
UK Consumer Confidence Falls to Three-Year Low as Borrowing Costs and Job Concerns Rise
UK Inflation Rises to 3.1% as Motor Fuel Costs Push Prices Higher
Bank of England Sets Multi-Year Plan to Wind Down Quantitative Easing Holdings
UK Borrowing Rises to £18.3 Billion in August Ahead of October Budget
Michelin Guide Faces Industry Questions Over Restaurant Inspection Coverage
English Woodlands Face Renewed Weather Stress From Dry Conditions and Strong Winds
Research Finds Extensive Alcohol, Gambling and Unhealthy Food Branding During 2026 World Cup
Five Charged After Newborn Baby Dies From Stab Wounds in Sheffield
BT Could Reap £2 Billion From Recycling Copper as Full-Fibre Network Expands
FCA Urges Young Adults to Trace £1.5 Billion in Unclaimed Child Trust Funds
Reform UK Names Helen Jenner as New Leader in Wales After Dan Thomas Steps Down
Resolution Foundation Calls for Broad-Based Tax Rises to Fund Higher UK Defence Spending
Ed Davey Calls for Global Treaty to Halt Development of Super-Intelligent AI
Scotland Consults on Legal Price Caps for Essential Foods
×