UK interest rates have been left unchanged at 5.25% by the Bank of England.

The decision comes a day after figures revealed an unexpected slowdown in UK price rises in August.

The Bank had previously raised rates 14 times in a row to curb inflation, leading to a surge in mortgage payments but also higher savings rates.

However, the latest move raises the prospect that this cycle of rate increases may have peaked.

BoE’s Monetary Policy Committee voted by a narrow margin of 5-4 to keep its “base rate” at 5.25%.

Four members – Jon Cunliffe, Megan Greene, Jonathan Haskel and Catherine Mann – voted to raise rates to 5.5%.

Industry reaction: 

Nathan Emerson, CEO of Propertymark, commented: “It’s positive to see that the bank rate has remained unchanged this time around and will be reassuring for those looking to enter the housing market especially. This now indicates that rises to interest rates have been impactful and that the fall in house prices has helped to even the affordability playing field and keep the wheels of the housing market turning.”

Nick Leeming, Chairman of Jackson-Stops: “This might be the dawn of a new era, ushering a hopeful period of stability for mortgage holders. Finally, the Bank of England is reigning in from further action as inflation marginally falls, dropping from 6.8pc to 6.7pc last month. A momentous sigh of relief can be heard up and down the UK, especially those half a million mortgage borrowers whose fixed-rate deals are coming to an end. The pause in rate hikes is an unquestionable win for homeowners.

“Whilst the effect on consumer spending will continue to be impacted by inflation in the short term, the housing market is driven by a pool of lifestyle and needs-based buyers, in which larger life-changing purchases are being prioritised; a trend we’re seeing across our national network of branches. If banks continue their pattern in offering more competitive mortgage deals, this could give the housing market a sprinkle of activity before the year’s end.”

Lucian Cook, head of residential research at Savills: “The Bank of England’s decision to maintain the current base rate is an important signal to the mortgage markets and should take some of the edge off the affordability pressures buyers are currently facing.

“However, a material improvement in mortgage affordability requires the prospect a cut in interest rates coming onto the horizon. That still looks some way off, suggesting buyers’ budgets are going to remain constrained and that there is a little way to go before house prices bottom out.”

Matt Thompson, head of sales at Chestertons: “Today’s announcement brings to an end a sequence of 14 consecutive rate hikes since March 2020. Speculation had intensified in the last week that the Bank would leave interest rates unchanged following the recent announcement that interest rates were nearing its peak. This though does not mean that the Bank has finished its current cycle of interest rate hikes, with the consensus expectation being for one more increase as the Bank continues to address high inflation. Once this has been reached, the Bank is expected to maintain interest rates at that level as it waits for the impact of higher interest rates to feed through to the weakened economy.

“The good news for borrowers is that the cost of borrowing is expected to stabilise with the Bank rate; although we don’t anticipate mortgage rates will return to the low levels seen in recent years. Nonetheless, we expect a positive response from buyers, who are now able to make financial decisions based on greater certainty that the cost of borrowing won’t increase much further.”

Jason Tebb, chief executive officer of OnTheMarket: “The Bank of England’s decision not to raise interest rates will be welcomed by borrowers hoping that base rate has now peaked after many months of increases.

“Consecutive rate rises have exacerbated increasingly stretched affordability and done nothing for the confidence of buyers relying on mortgages. It is hoped that this pause will give buyers and sellers who had put plans on hold more confidence to transact.

“While serious buyers and sellers continue to engage with each other, it remains essential that property coming to market is priced sensibly, ideally under the guidance of an experienced agent who appreciates the nuances of their local market.”

James Forrester, MD of Barrows and Forrester: “Good news for borrowers and today’s decision will bring about a notable boost to an otherwise uncertain housing market.

“We’ve already seen signs that mortgage rates are falling this week, driven by a reduction in swap rates and this could well be the peak, with rates set to reduce from here on out.”

Chris Hodgkinson, MD of House Buyer Bureau, commented: “Despite today’s freeze many of those considering a property purchase are likely to remain sat on the fence while the cost of borrowing remains considerably higher than it has in recent times.

“For sellers, this means less interest from buyers, a prolonged transaction timeline and a greater chance that their sale could fall through due to heightened market uncertainty.

“The one positive to take is that house prices are yet to show any significant signs of instability and so those who can secure a buyer should still be able to sell for a good price, albeit it may take some time longer to do so in current market conditions.”

Rightmove’s Matt Smith: “The surprising decision to hold rates rather than raise them as expected is another indication that we may now be at the peak of Base Rate rises. It will be particularly welcomed by those on a tracker mortgage who won’t see a rise in their monthly payments for the first time since December 2021.

“Today’s decision to pause rates is positive news for prospective home movers, and it is likely that lenders will continue to reduce rates, as we’ve seen over the last eight weeks, and we may see the pace of reductions increase in the coming weeks.

“History tells us that tracker mortgages may now become more appealing to borrowers. Whilst we expect five-year fixed rate products to continue to be cheaper than shorter-term deals for the foreseeable future, borrowers may be more willing to pay a premium to get a tracker or two-year fixed rate mortgage now, anticipating that rates will fall in the medium term, rather than locking themselves into a five-year deal at a high rate.”

Marc von Grundherr, director of Benham and Reeves: “Today’s freeze will be a small victory for the nation’s homebuyers who have seen the financial goal posts move constantly in recent months. But despite rates remaining unchanged there will still be a real worry for those coming to the end of a fixed rate term, having previously locked in at a relatively affordable rate when they first purchased.

“When their mortgage term does expire, they are likely to find that the cost of their monthly repayments has risen considerably and this is really the last thing anyone wants to contend with, not only with the current cost of living, but with Christmas just around the corner.”

Arjan Verbeek, founder and CEO of Perenna: “Although we have seen signs of stability today, it doesn’t take away from the uncertainty many homeowners have experienced over the past few years with 14 successive rate hikes previously. First time buyers continue to struggle with affordability and those coming to the end of their short-term fixed rate mortgages, on trackers or SVR, have had to grapple with the worry of whether interest rates are going to increase and if they’ll be able to afford their mortgage payment.

“European counterparts, such as Denmark, rely on mortgage banking models which are long-term, fairly priced, and create an affordable housing market. These markets, and the preference towards long-term fixes, have consequently avoided such mortgage volatility for homeowners.

The UK mortgage market needs to change. Lenders, regulators and the government need to begin placing the same weight and importance behind long-term fixed mortgages as they do short-term. Wider macro-economic volatility still exists, and while today’s decision will be a relief to most, providing borrowers with a greater choice of long-term fixed mortgages to avoid such volatility is clear.”

Hina Bhudia, partner, Knight Frank Finance: “Yesterday’s positive inflation figures and the Bank of England’s decision to hold the base rate at 5.25% will both pave the way for lenders to make more cuts to mortgage rates in the weeks ahead.

“The pace at which borrowers are opting for tracker mortgages over fixed rate products will now pick up. Both trackers and two year mortgages are priced in similar ranges. If the base rate has now peaked and rate cuts begin around the middle of next year as analysts expect, then borrowers stand to save money by opting for a tracker mortgage.

“Mortgage rate cuts have improved sentiment significantly, but they will eventually reach a natural plateau, with the best fixed rate deals starting with a four.”

Bets on interest rate hike today slashed after surprise inflation fall