The Bank of England has held interest rates at 4% following its latest Monetary Policy Committee (MPC) meeting.
The Bank rate, which sets the tone for borrowing costs and savings rates, was reduced from 4.25% to 4% in August, the lowest level for more than two years.
Inflation data released on Wednesday showed the rate holding at 3.8% in August, almost double the Bank’s 2% target, leaving policymakers cautious about further moves this year.
Nicholas Mendes, mortgage technical manager, said: “The Bank of England hold decision was widely expected.
“Markets had positioned for it, and swaps had already priced it in, so today’s decision on its own is unlikely to shift mortgage pricing.
“Inflation stayed at 3.8% in August, with services at 4.7% and core at 3.6%. That helps, but we are still some way from the 2% target. Softer air fares were offset by firmer restaurant and hotel prices and higher fuel.
“Food remains a drag, up about 5.1% year on year, and energy has nudged higher.
“The jobs market is cooling but not quickly: wages are near 5%, unemployment is around 4.7%, vacancies are down roughly 5.8% since May to about 718,000, and GDP was flat in July after a 0.4% rise in June. Taken together, that argues for patience.
“Inflation risks persist and activity is not weak enough to force a cut today.”
Mendes added: “Quantitative tightening is the other moving part. Far fewer gilts mature over the next 12 months. Keeping last year’s pace would mean a material increase in active sales.
“With heavy gilt supply and the run up to the 26 November Budget, easing the QT pace looks sensible.
“It lowers the risk of unsettling the gilt market and keeps attention on returning inflation to target. For mortgages, a well signposted hold is already in the price.
“I do not expect major reductions or a new burst of competitive repricing from lenders before the next couple of meetings.
“If we see a cut this year, December still looks the most plausible window.
“That gives borrowers room to secure a product now without worrying about missing a sharp sudden short-term drop-in rate.”
Reaction:
Mike Randall, CEO at Simply Asset Finance:
“Flat rates will be welcomed for now, but rising employer costs and uncertainty around November’s Budget could create a challenging backdrop for SMEs. If unaddressed, these factors risk holding back confidence if businesses are left guessing about the direction of travel.
“Nevertheless, for SMEs it remains business as usual – adapting, investing, and focusing on the long term – with a noticeable rise in the number of businesses turning to asset finance to manage costs and unlock their growth.
“What business leaders need now is clarity and stability from policymakers, so that short-term resilience can be translated into sustained growth and investment for the future.”
Ryan McGrath, director of second charge mortgages at Pepper Money:
“Today’s decision to maintain the status quo provides welcome stability for borrowers, particularly those on tracker products who won’t see immediate changes to their monthly payments. It also maintains a favourable environment for secured loans, allowing customers to access competitive rates without disturbing their existing mortgage arrangements.
“This steady approach from the Bank of England reinforces the value of second charge lending for homeowners looking to fund major life events or consolidate debt without adding exponentially to their monthly outgoings. In fact, customers who consolidate debts with a secured loan could reduce their outgoings by at least £600 on average.
“With the second charge market seeing strong growth over the past year, on track to reach £2bn of lending in 2025, it’s clear that more consumers are recognising the benefits. But there’s still work to do to ensure all homeowners are aware of the options available to them when managing their finances.”
George Holmes, managing director of business finance specialists Aurora Capital:
“This decision was widely expected, but small businesses needed momentum. It is frustrating to see the Bank showing caution and waiting for perfect conditions while the economy stalls.
“It feels like we’re stuck in no-man’s land. Inflation remains well above target, but growth is going nowhere. While the ECB holds at 2% and the Fed has started cutting, British SMEs are still battling elevated borrowing costs and stagnant demand.
“Markets are now betting against any more cuts in 2025, when at least one more was expected earlier in the year. Every month rates remain high, more small firms are forced to delay investment or close altogether. Meanwhile, international competitors have the opportunity to pull ahead with cheaper capital and more decisive policy action.
“The Bank is understandably trying to control inflation, but it’s ignoring everything else. Right now, the cost of waiting may be higher than the cost of acting.”
Nick Leeming, chairman of Jackson-Stops:
“The Bank’s decision to hold the base rate sends a clear signal: stability is the priority when faced with a changeable economic landscape. While a cut would have offered short-term relief to borrowers, this pause allows the market to adjust gradually and with greater confidence over the longer-term.
“Across the Jackson-Stops network, we’re seeing steady levels of exchanges and a healthy flow of new buyer registrations, supported by easing fixed mortgage rates. While those determined to complete before Christmas are already deep into their transactions, cash buyers now have a valuable opportunity, with a wide selection of properties available to them.
“Lifestyle-led moves continue to drive demand in locations like Tunbridge Wells, Chester and Colchester, where long-term value outweighs short-term volatility. Completions remain strong in commuter hubs like Sevenoaks and Hale, reflecting the resilience of micro-markets that offer connectivity, community and quality of life. Across England, transactions are moving at a pace shaped by local dynamics rather than national trends.
“As we enter the final quarter of the year, the message is clear; buyers are committed but now more discerning. The priority for the property market now must be to offer stability that can breed confidence and ultimately fuel completions.”
Rob Clifford, chief executive of mortgage and protection network Stonebridge:
“The Bank of England’s decision to hold rates today is proof of its increasingly cautious stance in the face of resurgent inflation. The spectre of 2022, when prices spiralled, still looms large for the Monetary Policy Committee – and it is clear it is determined not to repeat exposure to that risk, even though some regard it as remote.
“That means it could be some time before we see borrowing costs fall again. Markets now put the odds of a cut this year at just one in three, with the next quarter-point reduction not expected until spring 2026.
“That will disappoint some borrowers holding out for further cuts before switching deals. But conditions have improved significantly over the past 12 months to the great advantage of most borrowers.
“Mortgage rates are around 50 basis points lower than a year ago, thanks to cheaper funding and fierce lender competition. That means there are plenty of attractive options on offer to those who need to refinance before the end of the year.
“For advisers, today’s decision is another prompt to not only engage early with customers coming up to refinance but to reengage with those who may have opted to wait – after all, only 61% of eligible borrowers who could refinance in H1 did. They will all need clear guidance to weigh the different products on offer and secure the deal that best fits their circumstances.”
Ben Thompson, deputy CEO at Mortgage Advice Bureau:
“The Bank of England’s decision to hold the base rate at 4% comes as no surprise, aligning with its recent commitment to taking a gradual and cautious approach to future rate cuts. While another cut before the end of the year isn’t off the table, the Monetary Policy Committee’s primary focus remains on getting inflation firmly under control.
“As always, bigger picture thinking is essential. Despite the current stability in interest rates and a wealth of innovative mortgage options, our research indicates that 27% of renters still feel homeownership is a pipedream.
“In actual fact, taking that first step onto the property ladder may be more achievable than you think. This is where expert guidance can make all the difference: a mortgage broker can help you navigate the market with confidence, and secure a deal that aligns with your financial situation.”
John Phillips, CEO of Just Mortgages and Spicerhaart:
“Even with the shock news on inflation yesterday, a hold on the base rate comes as no surprise. We know the central bank prefers its careful, gradual approach to monetary policy and with a cut last month, stubborn inflation and fierce headwinds at home and abroad, they are not likely to deviate just yet. Whether this leads instead to a November cut is still too early to call – while the economy is stagnating and needs an urgent boost, we just don’t know yet if inflation has peaked and what impact the upcoming Autumn Budget will have.
“This week’s news is more likely to deliver a correction, rather than a dramatic change in mortgage rates – with swap rates creeping up recently. The encouraging thing for us that in the main, buyers and sellers don’t seem to be holding off on their plans with good business levels across both estate agency and financial services.
“While the picture ahead is still unclear, brokers are continuing to deliver real value to clients in navigating the market today – exploring options, nurturing confidence and providing a five-star service.”
Nathan Emerson, CEO of Propertymark:
“Throughout the world, many central banks have faced considerable pressure to reduce interest rates, and the UK has been no exception. The Bank of England remains in a challenging position to achieve long-term economic growth and not risk disrupting the progress already made.
“Today’s freezing of interest rates will give perspective to current homeowners and provide reassurance to those looking to take a new mortgage product, that costs will generally remain steady for the time being.
“Ultimately, it would be good to see base rates track downwards. However, it remains positive that we have seen an overall reduction since the start of the year, which has assisted in generating greater affordability for many.”
Simon Webb, managing director of capital markets and finance at LiveMore:
“The MPC’s decision to hold the base rate at 4% has been widely expected as the Bank juggles persistently high inflation and weak growth. While borrowers will always welcome cuts, this stability gives lenders and intermediaries the space to plan with greater confidence.
“All eyes will now be on November’s Budget and the impact that might have on the housing market and the potential for further rate cuts before the end of the year. Later life lending is set for continued growth. Increasing demand and awareness create clear opportunities to help older borrowers with solutions designed to meet their individual needs.”
Charles Resnick, chief finance officer at Afin Bank:
“After last month’s history making re-vote, today’s meeting was always expected to be less dramatic, so no change in the base rate is no surprise. However, there was a lot for the MPC to chew over today, not least a 3.8% rate of inflation that is still above the Bank’s target of 2%.
“The market is pricing in one more rate increase before the end of the year, expected to be in November. At that point the MPC will also have to factor in how the Budget, as well as possible tax rises, will impact the economy’s near-term growth prospects.
“For now, borrowers can expect to see their mortgage interest rates remain at current levels, while savers might consider taking advantage of some of the higher longer-term fixed rates on offer to make the most of their money before the base rate drops again.”
Richard Pike, chief marketing and sales officer at Phoebus:
“While inflation was not quite as high as some anticipated yesterday, it remains above target and continues to weigh on households and businesses. Against that backdrop, it’s little surprise the Bank has held its line and the market has largely priced in today’s decision.
“The bigger question now is whether we will see another cut before the end of the year. That prospect will rest heavily on the signals coming out of November’s Budget, which could determine how quickly confidence returns to both households and industry.”
Nick Hale, CEO of Movera:
“This move was expected by the MPC, despite yesterday’s news that inflation did not hit 4% as forecast. With ONS data also confirming this week that the jobs market has continued to cool, a further base rate cut would be beneficial in November. But only time will tell whether the Autumn Budget is likely to impact spending habits and derail the Bank of England’s inflation projection – pushing the prospect of another cut back into 2026.
“In the meantime, for brokers and conveyancers, it’s important that transactions keep moving. Clients will be looking for clarity on whether now is the right time to move or remortgage. A hold provides a period of stability – some breathing space for brokers to prioritise building client relationships and providing that much needed advice and guidance.
“Likewise for conveyancers, now is the time to focus on making headway with transactions and streamline your key processes. As if inflation turns in the coming months and the base rate falls with it, efficiency will be the only way to stay afloat in a buoyant market.”
