UK interest rates have been left unchanged at 5% by the Bank of England.

Until last month, interest rates had been at a 16-year-high of 5.25%.

The Bank of England’s decision to hold the base rate at 5% comes as no surprise after inflation data revealed core inflation jumped to 3.6% in August, despite headline inflation holding steady at 2.2%.

With inflation pressures persisting, the BoE’s decision signals caution, especially given its forecast of inflation rising again toward the end of the year.

The Monetary Policy Committee kept the Bank Rate unchanged, in an 8-1 vote: Eight board members chose to hold interest rates at 5%, while one member of the Bank of England board decided to lower it to 4.75%.

Industry reaction: 

Nathan Emerson, CEO of Propertymark, commented: “Since the initial rate cut a few months ago, many people will have been closely awaiting any further anticipated cuts, however, it remains crucial the Bank of England continue to implement cuts in a controlled and functional manner, as not to fast reverse the economic progress so far.

“Bearing in mind yesterday’s figures regarding inflation, it is understandable why the decision to hold the base at current levels has been employed. Propertymark remains keen to see full consistency within the wider economy and for any eventual base rate cuts to create a pathway for people that provides long-term stability, confidence and affordability.”

Guy Gittins, CEO of Foxtons, remarked: “The nation’s homebuyers will have understandably been hoping for a second consecutive rate reduction today, having already responded favourably to what was the first cut in four years at the start of August.

“Since then, we’ve seen an increase in buyers entering the market by way of strengthening mortgage approval numbers and they are doing so with far greater confidence, which is helping to cultivate a consistent level of upward house price growth.

“Whilst rates have been held today, this improving market momentum is only likely to strengthen further, as mortgage rates continue to trend downwards, putting the property market in very good stead for the remainder of the year.”

Matt Thompson, head of sales at Chestertons, said: “With inflation ever so slightly above the 2% target, it was unlikely for the Bank of England to announce a rate cut but more probable following the next Monetary Policy Committee meeting on 7th November. In the meantime, buyer interest has picked up since interest rates were reduced to 5% in August. At the time, the rate reduction boosted buyer confidence which led to more house hunters resuming or starting their property search.”

Sam Mitchell, CEO of Purplebricks, commented: “Despite the Bank of England’s decision to hold interest rates today, we’ve seen strong momentum build in the housing market in the last month: mortgage rates are at 18-month lows, listings are at multi-year highs and relative political stability has encouraged buyers to forge ahead with their purchasing decisions. But another looming decision could erase these hard-won gains – the speculated plans to increase capital gains tax (CGT) in the October Budget.

“Hiking CGT is an anti-landlord tax and we have already seen a sell off in anticipation of the increase. This further hit to an already low housing supply will drive skyrocketing rents even higher and make it even harder for first time buyers to get on to the housing ladder. We would urge the Government to instead focus its efforts on more progressive incentives such as CGT breaks for landlords if they sell their properties to tenants or first-time-buyers.”

Nick Leeming, Chairman of Jackson-Stops, said:  “The Bank of England’s decision to hold rates steady was widely expected but does suggest that bringing interest rates down will be a test of stamina not speed.

“Stubborn inflation over the summer months and Labour’s first fiscal statement fast approaching will no doubt be weighing on the market’s mind; the Bank has opted today to offer stability by exercising quiet caution.

“While further cuts to the base rate would help to remove a number of obstacles for buyers and sellers, what the property market needs above all is certainty. A sensitive, gradual, adjustment to the base rate can offer that.

“We are already seeing greater levels of activity within the market, and house prices steadily increasing on a month-by-month basis. Across the Jackson-Stops network in August, both instructions and completions were up on an annual basis, showing the immediate impact of Labour’s election victory, offering much needed clarity for buyers, before Government has even had the chance to make meaningful policy change.

“The Bank of England and the property market will be watching closely to what Labour has to say in the Budget next month, hoping that any policy announcements nurture these early signs of recovery.”

John Phillips, CEO of Spicerhaart and Just Mortgages, noted: “Today’s decision was widely expected given the cautious approach the Bank of England continues to adopt. News of inflation remaining unchanged would have certainly been a relief for the central bank, but not enough for it change course and move to sequential cut. The Fed’s large cut last night wasn’t a big enough driver either, even with the central bank’s tendency to follow their lead. Nonetheless, sentiment continues to point towards the next cut coming in November, barring any surprises or potential shocks to the economy – either at home or from abroad.

“Even without another rate cut though, we are continuing to see activity across the market, with lenders in all sectors making reductions and criteria changes to encourage new business and increase market share. From our perspective, clients have responded well to the changes in the market and returned from the summer break with house moves back on the agenda. The best brokers are already responding to this and are proactively positioning themselves to help clients navigate the market and seize opportunities.”

Andy Mielczarek, CEO of Chetwood Financial, said: “The Bank of England’s decision comes as no surprise and reinforces the sentiment that a period of economic stability is best for Britons. With inflation holding steady, it’s important that the central bank lead by calm and confident example to the public, and it has done precisely that.

“Whilst existing mortgage holders would have liked to have seen a further reduction, they can remain optimistic that the borrowing environment will be less temperamental and that they can make confident longer-term financial decisions. New customers can be hopeful that this period of stability continues, and that a more beneficial mortgage outlook can make their investment decisions more attractive.

“For the time being, savers will be happy the rate has remained the same but could be forgiven for thinking it may be the last chance to maximise returns, especially on fixed-rate savings products. They must remain diligent in searching the market for the best returns before a potential further reduction to the base rate.”

Simon Gammon, managing partner at Knight Frank Finance, added: “Caution from the Bank will have little impact on the slow, downward trajectory of mortgage rates. Global inflation looks increasingly benign, so much so that the Federal Reserve opted for a bumper 50 basis point cut yesterday. That brightening global picture is pushing swap rates down, giving the lenders leeway to keep cutting.

“Wednesday’s UK inflation data did little to change the narrative that the Bank of England has the wiggle room to cut the base rate once or twice before the end of the year, which should help usher in sub-4% two-year fixed-rate mortgages,” he says.

“While that’s higher than most people are used to, rates at that level are palatable and will support a sustained recovery in housing market activity.”

Bank of England urged to cut interest rates today despite above-target inflation