Bank Rate stayed at 3.75%. Mortgages didn't.

Good evening!

The Bank of England left Bank Rate unchanged last week.

Normally that sounds like a fairly uneventful mortgage story. Dig a little deeper and borrowing has already become more expensive, which is a useful warning when trying to work out whether a self-build will still be affordable six or twelve months from now.

Bank Rate stayed still while mortgages moved

The Bank of England voted 6 to 3 on 17 September to keep Bank Rate at 3.75%.

Three members actually wanted to increase it to 4%, with the Bank concerned that higher energy prices could keep inflation above target for longer. CPI inflation reached 3.1% in August and the Bank now expects it to rise further over the coming quarters.

The Bank says the quoted rate on a two-year fixed mortgage is now around 0.95 percentage points higher than it was before the current energy shock began which is the number that matters to us.

Bank Rate is only part of the mortgage price

I used to think about mortgage rates largely as a consequence of what the Bank of England did with Bank Rate. There is an obvious relationship, particularly with variable-rate borrowing after all. However fixed mortgages are more complicated.

Lenders price them partly according to what financial markets expect interest rates to do during the period for which the mortgage is fixed.

The Bank's September minutes show how quickly those expectations have changed. Short-term market interest rates have risen and the market curve was pointing upwards, reaching around 4.9% by the end of 2027. The Bank also said those changes had passed through quickly into lending rates faced by households and businesses.

That helps explain something that otherwise looks contradictory. Bank Rate has been 3.75% since December 2025, yet mortgage rates can still become considerably more expensive.

For a self-builder, there is another complication. Our mortgage may not even be arranged until months after we first calculate the budget.

A 1% change is not small on a self-build

Take a £300,000 mortgage as a simple example.

At 4.5% over 25 years, the monthly repayment is roughly £1,667.

At 5.5%, it becomes roughly £1,842.

That is about £175 more every month, or just over £2,000 a year.

The house has not become any bigger. The kitchen has not improved.

You'd simply have less disposable income available to satisfy the lender's affordability assessment and less money left each month once the house is finished.

Self-build mortgages are specialist products, usually releasing funds in stages as the project progresses. The amount available still depends on affordability, loan-to-value limits and the lender's assessment of the project.

If rates move between early feasibility work and the actual mortgage application, the amount you can borrow may move with them.

That creates a Finance risk.

The Bank of England's September decision gives us no certainty about where rates go next. Six members thought 3.75% remained appropriate, while three thought inflation risks already justified an increase. The next decision is due on 5 November.

It may be sensible to factor in your own stress tests when working out how much you can realistically afford to repay each month.

This week's biggest self-build news…

A Class Q conversion failed because of noise, not the building

21 September 2026

An appeal involving the conversion of two agricultural barns at Ashton Farm in Somerset into seven homes has been dismissed under Class Q.

The interesting part is that the planning inspector accepted that partial demolition was reasonably necessary and that the remaining structures were still capable of being converted rather than effectively rebuilt, however, the proposal failed because the evidence did not give enough certainty about noise from continuing agricultural activity around the barns.

That might be useful to keep in mind when assessing a potential Class Q site.

Lichfield is asking landowners to submit sites

Consultation open until 5 October 2026

Lichfield District Council is preparing a new Local Plan covering the period to 2046 and its current scoping consultation explicitly allows people to submit sites for consideration.

There is no guarantee that a submitted site will eventually be allocated for housing.

For anyone looking for land locally, though, a call for sites can reveal landowners who are actively trying to establish development potential long before a serviced plot appears for sale. It can also show where the council's future growth strategy may begin to concentrate.

I would therefore watch the submitted-site evidence as the plan develops, rather than waiting for the finished Local Plan.

Something worth reading

Another self-build PIP appeal gives the opposite answer

Recently a Bedford appeal where Permission in Principle was granted for between one and nine self-build or custom-build homes despite countryside conflict.

A new appeal published this week is interesting because the result went the other way.

At Rogers Lane in Findon, within the South Downs National Park, an Inspector dismissed Permission in Principle for a single chalet-style dwelling on 18 September. The authority could demonstrate only around 4.8 years of housing land supply, so providing another home received substantial weight. However, the Inspector found the site poorly related to a settlement, heavily dependent on private cars and harmful in landscape terms. Those effects outweighed the housing benefit.

There was also a self-build complication.

At PIP stage, planning conditions cannot be attached and planning obligations cannot be secured. The Inspector accepted that self-build status might potentially be secured later through the Technical Details Consent process, but did not treat it as secured at the PIP stage itself.

That is particularly interesting beside the Bedford decision, because it shows that two decisions show a common theme in planning where two similar applications can have completely different outcomes.

I hope this has been useful. Get back to me with any comments or questions.

Brendan