Editor's note: This brief was summarised by The Property AI Newsroom from a report by Property Industry Eye. Read the original article for full details.
Bank of England holds rates at 3.75% as industry warns of fresh market uncertainty
The Bank of England has kept interest rates on hold at 3.75%, but the prospect of renewed rate rises is casting fresh uncertainty over the housing and mortgage markets. The Monetary Policy Committee voted 6-3 to keep Bank Rate unchanged, with three members backing a 0.25 percentage point rise to 4%.
A sixth consecutive hold
The decision marks a sixth consecutive meeting without a change in Bank Rate, as policymakers grapple with renewed inflationary pressures and the threat of another energy price shock. UK inflation rose to 3.1% in August, remaining well above the Bank's 2% target, while financial markets have increasingly shifted expectations towards higher borrowing costs.
The changing outlook could have significant implications for mortgage affordability and housing market confidence, particularly for borrowers approaching the end of fixed-rate deals and buyers assessing how much they can afford.
Global and fiscal pressures
Pressure on global interest rates intensified after the US Federal Reserve raised rates by 0.25 percentage points, its first increase in more than three years, taking the federal funds target range to 3.75%–4%. Meanwhile, UK government borrowing costs have climbed sharply, with the 30-year gilt yield recently reaching its highest level since 1998.
What industry figures are saying
Jeremy Leaf, a north London estate agent, said the decision to leave rates unchanged had become trickier than it seemed a few weeks ago, with a rise increasingly likely sooner rather than later. He noted that an uplift would not be helpful to an already fragile, price-sensitive housing market, and that swap rates at a three-year high are prompting lenders to push up mortgage pricing.
Iain McKenzie, CEO of The Guild of Property Professionals, said the hold will come as little surprise, but higher inflation and rising swap rates feeding into mortgage pricing could put further pressure on purchasing power where affordability is already stretched. He suggested the autumn market could be more subdued than the usual seasonal pickup, particularly in higher-value areas, though there are early signs of buyers returning after the summer. He also noted that transactions in July were 2% lower than the previous month.
Jason Tebb, president of OnTheMarket, said the Bank kept base rate at 3.75% for another month, with inflation rising to 3.1% in the 12 months to August.
What this means for agents and clerks
For letting agents and inventory clerks, continued pressure on affordability and mortgage pricing may keep buyers price-conscious and could affect transaction volumes in the coming months.
Source: Property Industry Eye