The Bank of England kept interest rates on hold today at 4% and signalled a slower pace of bond sales warning that the UK economy remains vulnerable to inflationary pressures.
The Monetary Policy Committee voted 7–2 to maintain the base rate, in line with market expectations. The central bank also announced it would scale back the pace of quantitative tightening, reducing the planned disposal of government bonds to £70 billion from £100 billion.
Governor Andrew Bailey said the economy was “not out of the woods yet”, pointing to subdued growth, flatlining GDP in July and unemployment at a four-year high.
The Bank highlighted ongoing geopolitical risks, including global conflicts and new US trade tariffs, as further headwinds.
STICKY INFLATION
Inflation is forecast to remain at 4% in September, driven by rising food costs and higher employment expenses linked to Chancellor Rachel Reeves’ £25 billion national insurance increase for businesses set out in October’s Budget.
Markets had widely expected rates to be left unchanged following five consecutive cuts since last August. Investors now anticipate borrowing costs will remain at 4% for the rest of the year, with policy direction hinging on Reeves’ tax and spending plans due in November.
INDUSTRY REACTION
Guy Gittins, Chief Executive of Foxtons, says: “The decision to hold the base rate comes as no surprise given the fact that inflation remains stubbornly higher than the Bank of England would like.
“Of course, it remains very much a case of the tortoise, not the hare, where the current market trajectory is concerned and this is likely to continue in the lead up to the Autumn Budget, as many buyers adopt a wait and see mentality in hope of further stamp duty reforms.
“Whether or not this materialises remains to be seen, however, we anticipate a surge in market activity in the weeks that follow, with a particularly busy run-up to Christmas as pent up demand is released.”
FUTURE UNCLEAR
John Phillips, Chief Executive of Spicerhaart and Just Mortgages, said: “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.”
KEEN PRICING VITAL
Jeremy Leaf, north London estate agent and a former RICS Residential Chairman, says: “Doggedly steep inflation at a 19-month high in particular has clearly made the Bank of England even more nervous about cutting base rate despite wage pressures easing.
“So what is the outcome for respective home buyers and sellers? More are likely to retreat further into their shells where they were already cowering in anticipation of budget tax rises. This is even more reason for sellers to recognise the importance of keen pricing and appreciate the first offer received may be the only one.”
WE NEED A BOOST
Amy Reynolds, head of sales at Richmond estate agency Antony Roberts, says: “This hold in rates at 4% was expected, and is okay, as it provides stability and is far preferable to a rate increase.
“However, a drop in rates is required to give a boost to affordability which remains a brake on the housing market. For a real impact, we need the next reduction to be a half-point cut, rather than a quarter point.
“Never in my 25 years in the industry have I had so many conversations with people about the cost of stamp duty. The high cost of moving is prohibiting many from taking the plunge; people want to move but don’t feel confident enough to do so, which is causing stagnation in the market in some areas.”
CHOPPY WATERS AHEAD
Kevin Shaw, National Sales Managing Director, LRG, says: “It is no surprise that the Bank of England has chosen to hold interest rates at 4%.
“GDP grew only very modestly in the second quarter, consumer price inflation (CPI) – as we saw yesterday – remains above target and the political backdrop is anything but stable. In such circumstances, it is far better to pause now than to cut rates only to raise them again in the months ahead.
“For the property market, consistency is more valuable than short-term shifts. After several years of turmoil, stability is welcome.
“A potentially troublesome Budget is looming in November. For this reason and others, the Bank of England must appear to be steering a steady course, especially if there is a risk of choppier waters are ahead.
“Interest rates will inevitably be reduced in time, but for now the Bank’s decision provides the reassurance the economy – and the property market in particular – needs to move forward with confidence.”
NO SUPRISES
Iain McKenzie, Chief Executive of The Guild of Property Professionals, says: “Today’s decision by the Bank of England to hold rates is not surprising given the persistent inflationary backdrop, but it underlines the tightrope policymakers are walking between stabilising prices and sustaining growth.
“The housing market has demonstrated remarkable resilience this year, with steady transactions and modest price growth even against a shifting economic landscape. While buyers are still motivated, the prospect of higher-for-longer rates and looming tax changes will weigh on sentiment in the months ahead.
“For now, stability in borrowing costs should provide a degree of reassurance, but the focus will increasingly turn to the Chancellor’s Autumn Budget and its implications for both homeowners and investors.”
DISAPPOINTING
Jason Tebb, President of OnTheMarket, says: “As expected, the Bank of England held interest rates at 4%. With inflation holding steady at 3.8% in July, and with expectations that it will rise further before falling back, the rate setters voted by a majority of seven to two to hold rates until the picture becomes clearer.
“This will be disappointing for those who had hoped for another rate cut this time around. Five rate reductions in the past year have been hugely welcomed by buyers and sellers, boosting confidence, easing affordability and giving much-needed impetus to the market, particularly now that the stamp duty concession has ended.”
COSTS WILL REMAIN STEADY
Nathan Emerson, Chief Executive of Propertymark, says: “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.”
WINTER IS COMING
Verona Frankish, Chief Executive of Yopa, says: “Today’s rate hold will bring stability to the property market but it won’t help to ignite buyer activity which has remained subdued of late. This could result in a far longer winter than many home sellers may have liked, with the chances of Santa leaving a sale completion under the tree this December looking far slimmer.
“The positive is that the market is still standing strong and whilst we may see a lack of urgency from buyers with respect to making their move before Christmas, the long-term picture is one of continued house price growth and a steady and stable level of transactions.
“As a result, committed buyers and sellers should have no trouble in finding common ground before the year is out.”
MARKET IN HOLDING PATTERN
Marc von Grundherr, Director of Benham and Reeves, says: “The decision to leave the base rate unchanged will see the property market remain in a holding pattern for the foreseeable future, particularly with the Autumn Budget looming.
“This isn’t necessarily a bad thing given that the current market landscape is one of overarching positivity, driven by greater certainty and more measured house price growth, with both buyers and sellers benefitting as a result.
“There’s currently an abundance of stock on the market providing buyers with greater choice, the mortgage market is ripe with a range of more favourable products compared to previous years and house prices are climbing but not at extraordinary rates.
“All in all, the outlook is positive and there’s little to suggest this will change, even with wider economic headwinds caused by sticky inflation and flat GDP growth.”
COOLING MARKET
Daniel Austin, Chief Executive and Co-founder at ASK Partners, says: “With global volatility high and domestic policy still in flux, the MPC is holding steady.
“Markets are still pricing in a cut before year-end, but with the Autumn Budget looming and an uncertain economic background, policymakers are unlikely to move until fiscal plans are clearer.
“For homeowners and buyers, the hope of lower borrowing costs lingers, yet persistently elevated fixed mortgage rates mean relief is not imminent. With inflation unlikely to return to the 2% target this year, mortgage pressures look set to persist.
“Investors and developers will also be watching closely. Resilient sectors such as co-living, build-to-rent and storage continue to attract capital thanks to tight supply and strong demand, but a stable downward inflation trend is critical to unlocking broader activity. Should the predicted BoE cuts arrive, they could act as a spark, but for now, only the most agile investors may find opportunities in a cooling market.”
PERIOD OF STABILITY
Nick Hale, Chief Executive of Movera, says: “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.”
INFLATION CHALLENGE
Jonathan Handford, Managing Director of Fine & Country, says: “The Bank of England’s decision to hold rates reflects the ongoing challenge of tackling inflation while supporting growth.
“For the housing market, stability in borrowing costs should help maintain the resilience we’ve seen this year, with steady demand and improving affordability driven by wage growth and a greater supply of homes for sale.
“That said, uncertainty around potential housing tax changes in the Autumn Budget risks unsettling sentiment, and realistic pricing will remain essential for those hoping to secure a move before the end of the year.”
PATH OF RESILIENCE
Colby Short, Co-founder and Chief Executive of GetAgent,says: “Today’s decision will come as no surprise and while no news is technically good news, it will do little to move the dial for the property market.
“This means we continue on a path of resilience rather than rapid growth and with inflation remaining well above target, wage growth softening and GDP flatlining, this could remain the case for some time.
“The real driver of activity in recent months has been the improving mortgage landscape, with lenders easing affordability and broadening product choice. Until the Bank takes firmer steps on inflation, that lender-led momentum will remain the key factor keeping the market moving.”
LENDERS WILL REMAIN CAUTIOUS
Simon Gammon, managing partner at Knight Frank Finance, says: “The Bank of England’s decision to hold the base rate at 4% today comes amid growing consensus that we’re at, or near, the peak of this cycle.
“Markets have all but ruled out further rate reductions before the end of the year. HSBC and Deutsche Bank have pushed back their forecasts for the next cut, citing persistent inflation and economic uncertainty.
“Inflation remains stuck at 3.8%, well above the Bank’s 2% target, meaning the MPC is rightly cautious. Having already trimmed rates in August, it appears the Committee is waiting for more convincing evidence that inflation is easing consistently before moving again.
“In terms of mortgages, that suggests fixed-rate products may see less downward pressure than many hoped. Lenders will likely stay cautious, pricing in the risk that rates might stay higher for longer. Variable-rate borrowers may see little immediate change, with stability rather than relief the likely theme for the months ahead.”
AGENTS NEED TO BE READY
Claire Van der Zant, Chief Executive of Novus Strategy, says: “The Bank of England may be drip-feeding rate cuts into the mortgage market but activity is primed for a rebound.
“Transactions haven’t been over 100,000 in a single month since September 2021 and yet between 2013 and 2019 they were regularly at or approaching this level, crossing this boundary seven times.
“With money markets pricing in two more rate cuts by the end of next year and affordability measures easing back, the market could return to similar volumes relatively soon as buyers start reacting to a more favourable rate environment.
“If that proves correct, then lenders, brokers, agents and conveyancers need to be ready for more transactions. While that’s great news for everyone, lenders are going to have to be careful because they find it harder to make money the lower interest rates go.
“To bolster margins we need more than just internal technology and digital transformation. To unlock the next level of capacity and growth, lenders need to connect to the whole homebuying ecosystem to boost underwriting efficiency and reduce the impact of costly fall-throughs.
“The framework underpinning this second phase of transformation is what’s being called Horizontal Digital Integration (HDI). This is where open networks and data standards unlock transparency and information sharing across all businesses involved in a transaction. It’s the opposite of the endless rekeying, data silos and delays created by businesses that benefit hugely from technology right up until the moment they need it to talk to someone else.
“So there’s a huge incentive for lenders to drive forward the digitisation of homebuying as quickly as possible.
“They’ll find they’re pushing at an open door, particularly with agents and borrowers who are beyond frustrated by the unnecessary duplication and delays that still dog the typical transaction. And they’ll also learn a lot more about their customers, which they can use to drive demand for other products at any point in the mortgage cycle.”
BUDGET UNCERTAINTY
Matthew Thompson, head of sales at Chestertons, says: “Higher inflation has made a rate cut very unlikely today, leaving many house hunters frustrated.
“There are speculations over interest rate reductions later this year but with uncertainty over what will be announced in November’s Autumn Budget, it’s far from guaranteed.
“Despite this, mortgage products are at an 18-month low which a lot of buyers are currently taking advantage of.”
OVER-SUPPLY ISSUES
Shepherd Ncube, Chief Executive of Springbok Properties, says: “Today’s decision to hold the base rate will do little to boost a housing market that has been stagnating for some time, particularly at higher price thresholds.
“The current reality is that the market is suffering from a high level of over-supply and there simply isn’t a sufficient number of buyers acting with conviction. This has resulted in sellers having to slash asking prices in hopes of enticing an offer and, even when they are successful, we’re seeing a great deal of transactions fall through.
“This is leaving many sellers understandably frustrated and whilst we would usually see a surge in activity in the run up to Christmas, this year, the chances of completing before the turkey hits the table are very slim indeed.”
THOUSANDS OF DEALYS
Joe Pepper, UK Chief Executive Officer at PEXA, says: :“The chances of a rate cut happening today were almost non-existent, and with inflation remaining sticky and consumer prices rising, we now expect no cuts until 2026.
“Even if we did get one, it would have negligible positive impact on borrowing costs since it would have already been priced in by lenders.
“Aside from those who have no choice, we would now expect to see thousands of borrowers delay remortgaging until rates drop next year. When this does happen, the flood gates will open. There will be an enormous, almost unmanageable surge in demand for the cheapest rates.
“As always, the market will simply expect conveyancers to make do, but the truth is their capacity is already maxed out, and the lack of good infrastructure in place to help them will leave them floundering despite their best efforts to deliver for their clients.
“We must change this urgently by speeding up the digitisation of the process, freeing up conveyancers to focus on both remortgage and purchase transactions that need their expertise. Implementing the technology that creates certainty in the process is vital if we’re going to effectively navigate the challenges ahead.”
