The Monetary Policy Committee (MPC) voted 5–4 to hold, with Governor Andrew Bailey casting the deciding vote.
The message from Threadneedle Street was cautious optimism: the direction of travel for rates is still downward, just not yet.
For many homeowners and would-be buyers it’s a case of wait and see. Bailey made it clear that the MPC needs more evidence “that inflation is on track to return to our 2% target before we cut again.”
In other words, the Bank wants proof that price pressures are easing before risking another rate reduction.
That proof may come sooner rather than later. Inflation has already fallen sharply from its double-digit highs, with the Consumer Prices Index (CPI) now sitting at 3.8%.
The Bank forecasts inflation to continue declining toward its 2% target over the coming years, with some commentary suggesting it may reach around 3% by 2026.
With inflation cooling, growth anaemic and the labour market softening, the next logical step should be a rate cut but it seems that Bailey is wary of moving too soon.
Balancing Act
The MPC is walking a fine line between fighting inflation and protecting a fragile economy. Bailey described the outlook as “a gradual path downwards” for interest rates, a subtle change in tone that suggests we’re closer to the turning point.
But as ever, the Bank wants to see data rather than take a leap of faith.
Wage growth remains uncomfortably strong (up 4.9% excluding bonuses in the three months to August) and the job market is showing cracks.
Vacancies are falling, unemployment is edging higher and the Bank expects it to peak at 5.1% by mid-2026.
At the same time, households are saving more and spending less, suggesting that lower rates may not instantly revive consumer demand.
It’s this mix of stubborn inflation and weak growth that makes the Bank’s job so difficult.
The case for cutting rates is straightforward: the main inflation drivers - energy and food – appear to have peaked.
The case for holding is more complicated: wage pressures and high inflation expectations could keep services inflation sticky for months yet.
What It Means For Mortgages
For mortgage borrowers, the decision to pause is frustrating but not disastrous. Fixed-rate deals have already been falling steadily since summer, reflecting expectations of lower base rates in the months ahead.
According to Moneyfacts, the average 2-year fixed rate has dipped below 5% for the first time in over a year – a welcome relief for anyone coming off a pandemic-era deal.
Still, with the next MPC meeting on December 18- just three days before Christmas – many homeowners will be hoping for a bit of festive cheer. The odds of a rate cut currently stand at around 50/50 and much will depend on what happens between now and then: the Chancellor’s Budget on November 26, the next set of inflation data and how the markets respond.
For those with tracker or variable-rate mortgages, every hold delays relief.
But there’s a sense that the worst is behind us. After five rate cuts since July last year - down from a peak of 5.25% - the Bank appears to be setting the stage for a gentler 2026.
The Bigger Picture
Helen Dickinson, Chief Executive of the British Retail Consortium, summed up the frustration for households and businesses alike.
“Households will have to wait a little longer for mortgage costs to fall as the Bank of England confirmed that interest rates will remain at 4% once again,” she said.
She warned that food inflation remains stubbornly high due to domestic pressures – from wage costs to the new packaging tax – and called on the Chancellor to shield retailers from further tax hikes at the Budget.
The IMF has already warned that the UK is likely to have the highest inflation in the G7 next year, meaning even a small misstep on fiscal policy could keep prices elevated for longer.
If Bailey’s caution looks frustrating now, it may prove wise later.
Inflation that refuses to settle could force sharper cuts and reversals down the line, something which the MPC will be keen to avoid after the policy rollercoaster of recent years.
Next Steps
If you’re a homeowner on a fixed rate you’re in a relatively comfortable position. Expect your next remortgage to come in a little cheaper than six months ago but don’t hold out for dramatic falls. The path down from 4% will likely be gradual and not a cliff-edge leap.
If you’re on a variable rate or planning to buy soon the next few weeks could be pivotal. Keep an eye on the November 26 Budget and the December MPC meeting.
A clear sign that inflation is falling faster than expected could push rates down before Christmas; if not, the first quarter of 2026 looks more likely.
Either way, we’re now closer to the turning point than we’ve been in years.
After the longest period of high rates in more than a decade there’s a glimmer of light at the end of the tunnel.
Whether December brings Christmas cheer or fear will depend on how confident the Bank feels that inflation is finally under control.
For now, patience remains the best policy. Even if it is wearing thin.
Remember, smart choices start with expert advice – always speak to your mortgage adviser to get the best for your financial future.
The information contained within was correct at the time of publication but is subject to change.
Your home may be repossessed if you do not keep up repayments on your mortgage.
UK Property and Finance Expert
