The Bank of England has left interest rates unchanged at 3.75%, extending the current pause in monetary policy as policymakers continue to balance inflation risks against a weakening economic backdrop.

The decision, which had been widely anticipated by financial markets, marks the fourth consecutive meeting at which the Bank Rate has been held steady. The move means mortgage borrowers, homebuyers and property professionals will see no immediate change to the cost of borrowing.

The Monetary Policy Committee opted to keep rates on hold as inflation remains above the Bank’s 2% target, although recent data has been less severe than many economists feared following heightened geopolitical tensions and concerns over the impact of the conflict involving the US, Israel and Iran on global energy prices and economic growth.

The decision was voted in by seven members of the monetary policy committee (MPC), while two members voted to raise interest rates to 4%.

For the housing market, the decision, provides a degree of stability at a time when transaction levels remain subdued and affordability continues to weigh on buyer activity. Attention will now turn to whether easing inflationary pressures create scope for further rate cuts later this year.

Industry reaction: 

Mark Manning, managing director of Northern Estate Agencies Group:

“The property market across the north has remained remarkably resilient despite higher borrowing costs, cost of living pressures and wider geopolitical uncertainty experienced over the past few years.

“Although buyer confidence isn’t quite where it was when borrowing costs were considerably lower, buyers are still out there and still want to purchase when a property and its price are right. This rate hold should provide a degree of reassurance, particularly for those trying to plan their next move, but it is unlikely to change sentiment overnight. The outlook will continue to depend on inflation and the wider economy, but despite significant headwinds the market has faced over the past few years, it has continued to show stability, which buyers and sellers should find reassuring.”

 

Matt Smith, Rightmove’s mortgage spokesperson: “Today’s decision to hold the Base Rate will give some welcome short-term certainty to movers, and some recent easing in geopolitical tensions has helped to improve market sentiment, though the outlook remains sensitive to global events. There is now more limited pressure for mortgage rates to increase, and we may see lenders continue to gradually reduce rates in the coming weeks if this stability continues, with the average two-year fixed rate currently just above 5%.

“However, borrowing costs are still higher than many buyers have been used to, and remain a key factor shaping market behaviour. Our latest House Price Index shows that asking prices have dipped this month, with sellers responding to more price-sensitive buyers and increased competition.”

 

Frances McDonald, director, Savills residential research: “Today’s decisive (7-2) Bank base rate hold was largely expected by markets, particularly as May inflation figures remained steady, though inflation is expected to rise later this year as the effects of higher energy prices feed through.

“Mortgage rates have continued to gradually decline since April, but they remain elevated compared to the start of the year. News of the US-Iran Memorandum of Understanding provides cause for cautious optimism, but the aftermath of the conflict is likely to be felt for some time.

“Our latest forecasts reflect this ongoing uncertainty and constrained buyer budgets. In the mainstream housing market, we are forecasting price falls of -2.0% over this year, with the most significant falls in London and the South East.

“The prime markets, though less exposed to the interest rate environment, are more exposed to domestic political uncertainty and so we are also forecasting a softening of values over the course of the year, with a stronger recovery pushed out until 2028.”

 

Jason Tebb, president of OnTheMarket:

“As was widely expected, the Bank of England has voted to hold interest rates at 3.75 per cent for another month. With inflation holding firm at 2.8 per cent in the 12 months to May, this took a bit of pressure off the rate setters who chose to continue with their ‘wait and see’ approach, although two members voted for a quarter-point increase this time around.

“Although inflation is still above the Bank’s 2 per cent target, and is expected to edge higher on the back of inflationary pressures created by the Middle East conflict before it comes down, the Bank has to balance that risk with avoiding squeezing businesses and consumers who have already been hit by a rise in energy prices.

“While interest rate cuts have been hugely important in boosting buyer and seller confidence over the past couple of years, a further hold suggests a continued steadiness and stability which in these uncertain times is no less welcome.

“With lenders continuing to ease mortgage rates on the back of lower Swap rates, there is cause for optimism among borrowers. As ever, many people simply need to move – especially if they have repeatedly put on hold due to pre-Budget speculation, and geopolitical concerns – and these are proceeding with their transactions.”

 

James Stevenson, managing director of Sales at Foxtons: “Today’s decision was widely expected and reflects continued caution from the Bank of England as it balances the need to support economic growth against lingering inflationary pressures. Whilst rates may not have fallen at the pace many anticipated, the UK property market has remained remarkably resilient, with values holding up well compared to this time last year.

“We’re seeing a market of committed buyers. The people getting in touch are serious, well-researched and ready to move. For anyone waiting for the perfect rate climate, the wait carries its own risk. Even if you could time the bottom, lower rates bring buyers back all at once, and that competition is what costs you the home you want.

“For sellers trading up, a softer market is your friend. If prices ease, the larger home you’re buying tends to fall by more in pounds than the one you’re selling, so the gap you actually pay to move up shrinks. That gap is what matters, not the headline figure on either side.”

 

Nicky Stevenson, managing director of Fine & Country: “Today’s decision highlights that the Bank of England remains focused on bringing inflation back under control while supporting the wider economy. Although inflation has held steady at 2.8%, the impact of higher living costs is still being felt by households, and affordability remains a key consideration for many prospective homebuyers.

“The resilience of the UK housing market should not be underestimated. While uncertainty around global events and higher borrowing costs have weighed on demand, the market continues to be supported by committed buyers and sellers who need to move. However, sentiment remains more cautious, with some households taking a wait-and-see approach before making decisions.

“The recent reductions in mortgage rates from lenders are a positive step and, combined with a steadier economic environment, could help unlock demand over the coming months. The market remains competitive, with buyers having more choice than they have had for years, so sellers who price realistically are best placed to attract interest and achieve a successful sale. A recovery in confidence may take time to filter through, but the fundamentals of the housing market remain resilient.”

 

Verona Frankish, CEO of Yopa: “Today’s decision to hold the base rate comes as little surprise and, importantly, it provides a further period of stability for homebuyers and sellers alike.

“The property market has demonstrated remarkable resilience so far this year, with buyers continuing to transact despite higher borrowing costs than many had become accustomed to prior to 2022. Whilst a rate cut would undoubtedly have provided an additional boost to sentiment, consistency and predictability remain valuable in their own right.

“With inflationary pressures yet to disappear entirely, a measured approach from the Bank of England is understandable and we expect the market to maintain its current level of momentum as a result.”

 

Chris Hodgkinson, MD of House Buyer Bureau: “Today’s decision is unlikely to come as a disappointment given that a hold was already widely anticipated, but neither will it provide much of a catalyst for those waiting on the sidelines.

“The housing market has continued to function despite elevated borrowing costs, however many buyers and sellers remain highly sensitive to affordability and are looking for stronger signals that mortgage rates will ease further over the months ahead.

“For now, the Bank of England has chosen to prioritise stability and that’s understandable given the wider economic backdrop. But until we see a more meaningful reduction in borrowing costs, market activity is likely to remain driven by necessity rather than confidence.”

 

Nick Leeming, Chairman of Jackson-Stops: “The Bank of England’s decision to hold interest rates will be welcomed by many buyers and homeowners who have spent recent months navigating an increasingly uncertain economic landscape.

“While borrowing costs remain significantly higher than the levels seen in recent years, today’s decision provides a degree of consistency at a time when households and businesses continue to face wider economic pressures. Against a backdrop of ongoing geopolitical tensions and global market uncertainty, maintaining rates gives buyers greater confidence to plan and make informed decisions without the prospect of immediate further increases.

“For the housing market, stability is often just as important as affordability. Many buyers have already adjusted their expectations to the current interest rate environment, and a period of policy consistency allows confidence to build gradually across the market.

“While transaction levels may remain measured in the months ahead, holding rates should help avoid additional pressure on affordability and support continued activity among buyers and sellers. The market remains highly needs-driven, with people continuing to move for work, family and lifestyle reasons, and today’s decision provides a more predictable backdrop against which those decisions can be made.”

 

Simon Gammon, managing partner at Knight Frank Finance: “The Bank of England’s decision to hold rates, combined with weak pay growth and lower-than-expected inflation, will pave the way for mortgage lenders to cut rates over the coming weeks. The repricing began earlier this week when Nationwide reduced its headline two-year fixed rate to 4.29%, which is now the cheapest fixed rate on the high street.

“Many lenders have fallen short of their lending targets so far this year and will be looking to win a greater share of business during the second half. While we are unlikely to see a dramatic fall in mortgage rates, borrowers should benefit from a gradual improvement in deals over the summer, which will help support housing market activity later in the year.”

 

Nathan Emerson, CEO at Propertymark:

“With inflation still above the Bank of England’s 2 per cent target, a decision to hold interest rates at their current level reflects a cautious and balanced approach. Policymakers will be keen to ensure inflationary pressures continue to ease before making any significant changes to borrowing costs.

“For homeowners, buyers and sellers, today’s decision provides a degree of stability and certainty. While borrowing remains relatively expensive compared with recent years, holding rates steady avoids adding further pressure to household budgets and gives the housing market an opportunity to adjust.

“Many families are still recovering from the higher cost of living and elevated energy bills experienced over the past few years. If inflation continues to move in the right direction, there is growing hope that confidence will strengthen, helping to support increased activity across the property market and making home ownership more achievable for many.”