The Bank of England Monetary Policy Committee (MPC) has voted by a majority of 6–3 to maintain bank rate at 3.75%. Three members voted for a 0.25 percentage points increase, to 4%.
Bank of England governor Andrew Bailey said: “Inflation has fallen faster than we’d expected, but the conflict in the Middle East continues to mean high and volatile energy prices. That will cause inflation to rise again later this year. However the conflict unfolds, our job is to make sure any increase in inflation is temporary and that it comes back to our 2% target.”
Explaining the decision, the MPC said mortgage rates for households and borrowing costs for firms are higher than before the conflict which is making people more cautious about spending.
The committee added: “We are monitoring the situation very closely; whatever happens, we’ll make sure that inflation gets back to the target in the medium term; for the moment, interest rates are at about the right level to do that, so we’ve held them at 3.75%.”
The hold hasn’t filled finance and property experts with confidence.
From the finance sector, Samuel Fuller, director at Financial Markets Online, said: “The Bank of England’s hawks are doubling down.”
He added: “In recent weeks, markets had begun to predict that the bank would be content to leave interest rates unchanged for the rest of the year. That bet may now change as the bank’s minutes suggest it has refined its stance from ‘watch and wait’ to ‘watch and wait with a big stick’.
“While this means no immediate change for savers, we’re likely to see mortgage interest rates tick back up in coming weeks. With America’s on-off war with Iran now into its sixth month, continued volatility and lingering inflationary pressure have tipped the bank into more hawkish territory and UK equities and mortgage borrowers could be the biggest losers.”
Hargreaves Lansdown head of personal finance Alice Haine said borrowers should be concerned about future rate hikes. “Mortgage approvals may have edged up in May, reversing in part the sharp drop recorded in April, but activity is expected to remain subdued in the coming months as higher borrowing costs weigh on affordability.”
And Adam French, head of consumer finance at Moneyfactscompare.co.uk, warned borrowers not to expect any imminent rate cuts. He said: “Unless the economic backdrop improves significantly, borrowers should not expect mortgage rates to fall much anytime soon.
“Anyone planning to take out a mortgage within the next six months should consider securing a deal sooner rather than later to protect themselves against further increases.”
According to tech and property commentators, the hold offers an opportunity to improve the system.
Search Acumen managing director Andrew Lloyd agreed overseas events are beyond the bank’s control, but said the sector can address inefficiencies.
“From planning reform and housing delivery to productivity and tax competitiveness, there are levers firmly within the government’s grasp. Reform to any of these could take years to have an effect, so the spotlight is on measures that could support growth in the immediate term.
“And as the base rate is expected to rise to 4% in September, we need to think about ways to boost confidence, spending, and investment ahead of this change. Affordability concerns and debt levels continue to be primary market drivers. The road ahead feels uncertain, but hopeful, if swift action can be taken.”
Richard Sexton, commercial director at Houzecheck, agrees. He said: “As confidence gradually returns, the focus must shift from interest rates to transaction efficiency. Buyers may be ready to make their move, but the process needs to keep pace. Fast, reliable surveys and valuations will be essential to turning confidence into completed transactions.”
Jackson-Stops chairman Nick Leeming also suggested the sector should address practicalities. “For many households, the decision to move is driven by changing family circumstances, employment or lifestyle rather than an attempt to try to time the market. What those buyers increasingly value is confidence that, once they commit, the process will be straightforward, transparent and able to progress without unnecessary delays.
“While holding rates alone will not accelerate market activity, it provides a stable backdrop against which buyers and sellers can make informed decisions. As attention increasingly turns to improving the home-moving process, making transactions faster and more predictable could strengthen confidence and help more households turn their moving intentions into completed sales.”
Looking ahead, Propertymark CEO Nathan Emerson assessed the impact on the market.
“A stable base rate provides greater certainty for the housing market. It gives lenders more confidence to continue offering competitive mortgage products while allowing buyers to make informed financial decisions. Savers also continue to benefit from relatively attractive returns on savings, helping some prospective homeowners build towards a deposit.
“However, inflationary pressures have not disappeared. Higher household costs, including July’s increase in the energy price cap, alongside ongoing uncertainty in global energy markets, mean the Bank of England is likely to continue taking a cautious, data-led approach over the coming months.”
