The Bank of England has held interest rates steady at 4.75% after it was revealed that inflation in November rose to 2.6%, above the central bank’s target.

In its final meeting of the year, the Bank’s rate-setting committee decided against further cuts following recent data showing an increase in both inflation and wage growth.

The Office for National Statistics revealed yesterday that inflation had risen to 2.6% from 2.3%, pushed higher by pricier petrol and clothing.

Bank governor Andrew Bailey has previously indicated that while rates will fall further – after two cuts this year – the decline would be gradual.

The Bank will next meet in early February when it will also give an update of its forecasts for the British economy.

Industry reaction: 

Nathan Emerson, CEO of Propertymark, commented: “With many national and international factors continuing to shape the global economy, the Bank of England is understandably taking a cautious path until they can be confident that they are able to safely reduce interest rates back. It has been encouraging to see interest rates reduced across recent months, but the base rate can only be reduced if all factors allow.

Kevin Shaw, national sales managing director, LRG, commented: “It is disappointing that that Bank of England has decided not to reduce interest rates further today, considering that the UK’s interest rate (at 4.75%) is out of sync with the ECB (at 3%) and other comparative economies globally.

“My view is that the Bank was too slow to increase rates back in 2023 and now runs the risk of being too slow to reduce them. The Bank needs to release the handbrake on the economy as soon as possible.

“A variety of economic indicators – from business confidence and employment rates to consumer spending – suggest that a December drop would have brought some much welcome seasonal cheer.

“I am now hopeful of an interest rate reduction on 6 February.

“In the meantime, however, the start of the year is likely to provide some momentum – whether from those keen to initiate a move as part of their New Year’s resolutions, or in a rush to avoid the Stamp Duty hike in April. Furthermore, despite the holding of interest rates today, mortgage lenders are already competing on rates.

“I remain optimistic of a rush of activity in January, and a lowering of interest rates in February which will keep the momentum going into the Spring market.”

Jeremy Leaf, north London estate agent, said: “The lack of movement in base rate is not surprising given recent increases in inflation and wages as the Bank of England wants to see some stability before taking what it thinks is risks with the economy.

“However, as far as the property market is concerned, even a small cut in base rate would be welcome not just for those on fixed-rate mortgages who are facing considerable increases in their loans when they come to remortgage but also first-time buyers who are the engine of the market, wanting to escape from high rental levels and take advantage of reduction in stamp duty before 1st April.

“A reduction in mortgage rates is always helpful as it improves activity, which is good not just for those contemplating moving but for the wider economy.”

Nick Leeming, chairman of Jackson-Stops, commented: “Today’s decision reflects the ongoing challenge of balancing accelerated pay growth with persistent inflation. This cautious approach is understandable as the Bank seeks more clarity and fiscal headroom before considering a reduction in rates. Rates rise much quicker than they fall but the Bank of England must avoid cutting too soon and undermining the progress being made on inflation.

“The macroeconomic environment remains complex, with the Autumn Budget introducing tougher measures for businesses, potentially leading to higher costs for consumers. However, the Bank’s decision to hold rates steady provides a degree of stability, which is crucial for both the economy and the property market.

“For the property sector, mortgage customers will continue to carefully evaluate their financial options and long-term plans. Stability in government and economic growth is essential to bolster buyer confidence, which in turn can drive increased sales and completions. As we look ahead, a steady economic footing will be key to enabling the Bank of England to gradually reduce rates.

“Across the Jackson-Stops network we expect house prices to remain on par with 2024 and for Q1 to be particularly active as buyers strive to complete transactions before the end of current Stamp Duty incentives.

“While the immediate impact of the rate decision may be mixed, the longer-term outlook remains cautiously optimistic. A stable economic environment will ultimately support a healthier property market, benefiting both buyers and sellers.”

Matt Smith, Rightmove’s mortgage commentator, said: “In a rollercoaster year for the mortgage market, we end the year with a hold in the Bank Rate at 4.75%.

“While not the early Christmas present that many would have wanted, it was widely anticipated, and must be considered against a backdrop of inflation being at the top end of forecasts, and wages have increased at a higher rate than expected.

“We don’t expect any reductions in mortgage rates over the next few weeks, but as we progress into 2025, lenders are likely to look at ways to take advantage of increased demand as the busier home-buying season starts. As we move towards the end of the Stamp Duty reduction, lenders are also likely to look at reducing rates wherever possible

“Next year, three Bank Rate cuts are currently planned rather than the four anticipated just a few weeks ago, highlighting how quickly things can change in the market. We predict average mortgage rates could trickle slowly down towards around 4.0% next year, though this is dependant on the impact of a wide variety of unpredictable factors, including geo-political tensions and inflation.”

Marc von Grundherr, director of Benham and Reeves, added: “Not the Christmas cracker that many homebuyers were hoping for but not quite a lump of coal either and today’s hold on the base rate will do little to impact the current trajectory of the property market, particularly given the stamp duty deadline in place.”