The Bank of England (BoE) has opted to hold interest rates at their current level of 4%.

This follows the 0.25% reduction to the base rate in August, the fifth cut by the central bank since it started the cycle of bringing interest rates down from a peak of 5.25% in August 2024.

At its meeting this week, the nine members on the BoE’s Monetary Policy Committee (MPC) voted by a majority of seven to two to maintain the base rate at 4%. Two members were in favour of a further 0.25% cut which would have taken rates to 3.75%.

The BoE’s decision to maintain interest rates follows yesterday’s announcement from the Office for National Statistics (ONS) that inflation remained at 3.8% in the year to August, unchanged from its level in July.

In its latest report released today, the MPC suggested that inflation was expected to “increase slightly in September”, before falling towards its 2% target after.

“The committee remains alert to the risk that this temporary increase in inflation could put additional upward pressure on the wage and price-setting process,” the MPC said. “Pay growth remains elevated but has fallen and is expected to slow significantly over the rest of the year.”

The central bank’s move to hold rates had been widely expected by the mortgage industry, with deputy CEO of the Mortgage Advice Bureau, Ben Thompson, stating: “The BoE’s decision to hold the base rate at 4% comes as no surprise, aligning with its recent commitment to taking a gradual and cautious approach to future rate cuts.

“While another cut before the end of the year isn’t off the table, the MPC’s primary focus remains on getting inflation firmly under control.”

CEO of Just Mortgages and Spicerhaart, John Phillips, said: “This week’s news is more likely to deliver a correction, rather than a dramatic change in mortgage rates – with swap rates creeping up recently. The encouraging thing for us that in the main, buyers and sellers don’t seem to be holding off on their plans with good business levels across both estate agency and financial services.”

Chief commercial officer at Fleet Mortgages, Steve Cox, added: “While markets had previously priced in multiple rate cuts this year and next, that outlook has definitely softened. Economic headwinds – both domestic and global – mean the path to lower rates is likely to be slower and more uncertain than previously hoped.”

The MPC now has two more base rate decisions to make this year, with the next one due on 6 November, before the Chancellor announces her Budget on 26 November. The BoE will announce one final rate decision of the year in December.

---