The Bank of England’s Monetary Policy Committee has voted to maintain Bank Rate at 4%, by a majority of five to four, with the minority voting for a reduction of 0.25 percentage points.
Announcing the decision, the committee said CPI inflation is judged to have peaked. ‘Monetary policy is being set to balance the risks around meeting the 2% inflation target sustainably’.
“The risk from greater inflation persistence has become less pronounced recently, and the risk to medium-term inflation from weaker demand more apparent, such that overall the risks are now more balanced. But more evidence is needed on both.
“The restrictiveness of monetary policy has fallen as Bank Rate has been reduced. The extent of further reductions will therefore depend on the evolution of the outlook for inflation. If progress on disinflation continues, Bank Rate is likely to continue on a gradual downward path.”
The committee said future contemporaneous indicators of slack, labour costs and services inflation, together with indications of prospective pay settlements and the likely pricing power of firms, would provide important information on the evolution of risks associated with returning CPI inflation to the 2% target sustainably.
Voting to maintain Bank Rate at 4%, governer of the Bank of England and chair of the Monetary Policy Committee Andrew Bailey said:
“Upside risks to inflation have become less pressing since August, and I see further policy easing to come if disinflation becomes more clearly established in the period ahead. Recent evidence points to building slack in the economy, and the latest CPI data were promising. But this is just one month of data. Labour costs remain elevated and wage growth, while on a downward path of late, may plateau. In assessing the outlook, I find the mechanisms underlying upside risks less convincing than those underlying the downside…
“Rather than cutting Bank Rate now, I would prefer to wait and see if the durability in disinflation is confirmed in upcoming economic developments this year.”
In support of a 0.25% cut, Sarah Breeden, deputy governor of the Bank of England for financial stability, commented:
“Data since August have provided me with greater confidence that the disinflation process remains on track and that upside risks to inflation are not materialising. I judge that a degree of slack has and will continue to open up in the labour market, which should continue to dampen pay growth…
“Combined with my view that policy remains restrictive and slack continues to build, this gives me enough confidence to cut now.”
Explaining the reason behind the decision to maintain interest rates at 4%, Bailey added:
“Since August last year, we have been able to cut rates five times. Inflation has come down a long way from its peak three years ago, but it remains too high.
“In our decision to hold interest rates today, we have balanced the risk that above-target inflation becomes more persistent against the risk that demand in the economy is weakening, which might cause inflation to fall too low.
“If inflation stays on track, we expect to be able to gradually cut rates further.”
Commentary
John Fraser-Tucker, head of mortgages at Mojo Mortgages:
“For existing mortgage holders due to review their existing deals there is little change being offered in the rate market. We can expect relative stability barring any macro events that shake the funding markets, noting of course a well anticipated autumn budget…The window for active purchases is closing however with the seasonal December slow-down imminent, this may place more pressure on an already stagnant sale and purchase market with many perhaps opting to see where we are in the new year.”
Mark Michaelides, CCO at Molo Finance:
“[The] knife-edge voting decision (again), and increasing confidence that both pay and services inflation is under control, makes a December rate cut look very likely.
Assuming the 26 Nov budget delivers on fiscal discipline as anticipated, we expect a December rate cut to further stimulate the property market as we head into 2026.”
Daniel Austin, CEO and co-founder at ASK Partners:
“For homeowners and buyers, hopes of cheaper borrowing persist, but high fixed-rate mortgages mean meaningful relief remains distant. Inflation is unlikely to hit target this year, keeping mortgage pressures elevated and household confidence weak.
“In property, the decision reinforces a cautious “wait and see” mood. Buyers are pausing and developers holding back amid uncertainty over taxes, build costs, and the broader economy… Easing planning rules and offering temporary levy relief could help restart stalled sites, though demand-side stimulus will also be needed, through first-time buyer support, stamp duty reform, and incentives for domestic off-plan purchases.”
Nathan Emerson, CEO of Propertymark:
“Following four rate cuts since August 2024, today’s decision to hold interest rates reflects the Bank of England’s cautious approach in an uncertain economic climate. Stability can be reassuring for the housing market, giving buyers and sellers a clearer sense of direction after months of volatility.
“However, for many, affordability remains stretched, and the market would benefit from further easing when conditions allow. Sustained rate stability or a gentle reduction in the months ahead would help bolster consumer confidence and keep transactions moving.”
Andrew Lloyd, managing director at Search Acumen:
“Stability in borrowing costs is welcome, particularly as the market awaits the Chancellor’s Budget later this month, but holding rates steady will do little to reinvigorate activity across the property market in the short term.
“The government is consistently missing its housing targets, where an interest rate cut would have been a major boost to help UK developers reduce borrowing costs, stimulate buyer demand, improve project viability, and increase developer confidence. Lower financing costs to ease these margins, particularly with smaller housebuilders, could have been a real win at a particularly vulnerable time for the sector…
“If inflation starts to move downwards, we could see further monetary policy easing later this year, which, paired with political stability and renewed investor appetite, would help unlock a more active property market heading into 2026.”
Colin Bell, founder and COO of Perenna:
“The reality is that the Bank of England’s base rate is, in historical terms, normal. Rock bottom interest rates were an abnormality in the market.This is particularly an issue for those on shorter term fixed rates, for whom the monthly costs can feel challenging but who will still have to remortgage sooner rather than later. The reality is it will likely be a long time before rates drop to the levels seen in the 2010’s, if ever, so they’re better off adjusting to the new status quo and finding ways to give themselves some longer term financial security by opting for long term fixed rate mortgages that give them stable monthly mortgage costs.”
Ben Thompson, deputy CEO, Mortgage Advice Bureau:
“While the headline rate may feel elevated, the reality on the ground is much more encouraging. Three years of economic adjustment have delivered a much brighter picture: house price growth has flattened, wage growth in real terms is on the rise, and borrowing power is significantly better than it was 12 to 24 months ago. With lenders offering a wealth of innovative products, there are countless opportunities for prospective buyers to secure a competitive deal.”
Nick Leeming, chairman of Jackson-Stops:
“This wait and see position is one familiar with many homebuyers at the moment, keen to know what the Chancellor’s final decisions are on tax and spending policies before committing to a move. However, this might have been an opportunity missed by the Bank of England’s rate setting committee, in which a 25 basis points drop would have given the lending market a much-needed boost during this November lull…
“The slow pace of building is also a concern, with chronic undersupply keeping house prices high. Inflated costs and interest rates are impacting growth in the development sector, especially SMEs, leaving government targets unmet. Greater financial headroom may have been a welcome boost to those struggling to make the numbers work.”
Andrew Gall, head of savings and economics at the Building Societies Association:
“Despite innovative mortgages from building societies to help those with smaller deposits, and recent regulatory changes giving lenders increased flexibility to support borrowers, mortgage affordability remains one of the biggest barriers to homeownership. Our research shows that over half of first-time buyers (54%) say the cost of monthly mortgage repayments is an obstacle to becoming a homeowner. Mortgage repayments for new first-time buyers are now around 30% higher than in 2020 (22% of income vs 18%). This has led to the dream of homeownership turning into a sense of defeat, with almost one in three (29%) of those wanting to buy a home believing they never will.”
