The Bank of England decided (again!) to hold interest rates steady at 4%. No surprises there. Markets and analysts had already widely predicted a pause but it’s still worth unpacking what this means for households, mortgage borrowers and property investors.
At its latest meeting, the Monetary Policy Committee (MPC) voted 7–2 in favour of keeping the base rate unchanged. Two members of the committee did vote for a further 0.25 percentage point cut, but they were outvoted.
The last move in August brought rates down from 4.25% to 4%, marking a full 1.25 percentage points below the 5.25% peak we saw just over a year ago.
The next decision is pencilled in for 6 November and the outcome will depend on two big factors: the trajectory of inflation and the overall health of the UK economy.
BALANCING ACT
The Bank of England finds itself in a balancing act. On the one hand, inflation remains stubborn. The latest data from the Office for National Statistics showed consumer price inflation stuck at 3.8% in August, still well above the Bank’s 2% target. That’s enough to keep policymakers cautious. On the other hand, they don’t want to squeeze the economy too hard with higher borrowing costs.
By holding rates, the MPC is signalling two things: first, that they remain vigilant about inflationary pressures, and second, that they want to maintain some stability for businesses and investors. In a climate where confidence is fragile, stability is not a bad thing.
DISAPPOINTING
For anyone with a mortgage, the decision might feel like a disappointment. After all, a lower base rate should, in theory, feed through to lower mortgage costs.
But even if the Bank had cut rates again, most mortgage borrowers wouldn’t have seen much benefit in the short term.
That’s because lenders tend to base their pricing on longer-term interest rate expectations, not just the latest base rate move.
The markets are now signalling that we won’t see another meaningful rate cut until 2026. In fact, forecasts from both HSBC and UBS that rates will fall to 3% by the end of 2026 or 2027 and then stay there for some time before starting to rise again.
In other words, the mortgage deals you see on the market today already have those future expectations priced in. The base rate staying at 4% for now doesn’t really alter the picture.
If you’re on a variable or tracker mortgage, your rate will stay as it is - bad news if you were hoping for a cut, but at least not a sudden increase.
If you’re on a fixed deal you’re unaffected until renewal. For those coming up to remortgage, it’s still worth shopping around.
MARKET DYNAMICS
For property investors, the rate hold creates a slightly different dynamic. On one hand, the higher cost of mortgage borrowing remains a drag on the buy-to-let market. On the other, demand for alternative finance solutions, such as bridging loans, is likely to strengthen as investors look for flexibility.
Some in the industry believe we’re on the cusp of another rate reduction, but the Bank is clearly in no rush.
I suspect that a cautious, measured approach is the right one. Inflationary pressures haven’t gone away, and the Bank wants to avoid the risk of cutting too soon only to see inflation flare up again.
STICKY INFLATION
The key variable remains inflation. Until it comes down meaningfully closer to the 2% target, the Bank will keep rates higher than many would like. Even when rates do start to fall, the pace will be slow.
For households, that means adapting to a “new normal” where mortgages cost more than they did during the ultra-low rate era.
For investors, it means factoring higher borrowing costs into business plans and exploring new financing options.
The next MPC meeting on 6 November will be closely watched. My hunch is that rates will remain at 4% again, unless inflation surprises sharply on the downside.
Markets don’t expect real movement until 2026, and for once, I think the market might be right.
NOVEMBER BUDGET
Matt Smith, Rightmove’s mortgage expert, says: “The later-than-usual Budget is very much on the horizon, and the markets are having to wait until the end of November for answers to the questions that are driving a lot of the current uncertainty. So, it’s not surprising we’ve seen market expectations for the next Base Rate cut shift from late 2025, into early 2026.
“We’ve seen average rates drift up recently and we could see rates continue to rise in the coming weeks.
“This time last year, we saw a jump in activity as the Bank cut the Base Rate for the first time in four years. Our data shows that sales agreed are currently +3% higher than they were during this busy period, signalling that, for now, mortgage rate increases are not putting off those looking to move home.”
UK Property and Finance Expert
