Bank of England holds interest rates – industry reaction

The Bank of England has held interest rates at 3.75%. Policymakers voted 6-3 to make no change, with three members voting for an increase by 0.25 percentage points. Three members voted to increase base rate by 0.25 percentage points, to 4%.

Tamsin Powell, Consumer Finance Expert at Creditspring, said “Today’s decision to keep the base rate at 3.75% will come as little surprise, but for households, a pause in rates shouldn’t be mistaken for a pause in financial pressure.

“With inflation still above the Bank of England’s 2% target and energy prices continuing to put pressure on household bills, many people will still be feeling the squeeze. For those already managing tight monthly budgets, there may be little room to absorb another increase in the cost of essentials.

“The focus now needs to be on helping households navigate this period of uncertainty without taking on more financial pressure than they can manage. Understanding what is coming in and going out each month, planning for unavoidable costs and dealing with potential shortfalls early can all help people stay in control.

“For anyone considering borrowing to manage an unexpected expense, affordability should be the starting point. People need to be able to see clearly what they will repay and be confident that it fits within their budget before committing to credit.”

John Phillips, CEO of Just Mortgages and Spicerhaart, said “Even with the news on inflation yesterday, a hold feels like the right call for now. For how much longer though is the crucial question. There seems to be no sign of peace or even a truce in the Iran war and while oil prices have eased slightly overnight, they still remain very high and a key driver of inflationary fears. This all feeds into borrowing costs and the volatility in swap rates, helping explain the activity we’ve been seeing from lenders recently. We have to be conscious of the fact that the impact of this conflict will likely feed through for the remainder of the year – even if a resolution is somehow achieved.

“It’s been encouraging to see there are still clients making moves. Alongside a modest jump in buyer registrations and listings so far in September, we are seeing clients reviewing their mortgage options. While there are those needing to make moves, there are those asking the question – perhaps for the first time – about what it means for them and their circumstances. While rates are changeable, there is still plenty of money out there in the market and lenders willing to lend – particularly as we edge closer to their end of year targets. That fact alone could very well encourage some positive activity. Quality advice is absolutely crucial right now and it’s up to us to remind potential borrowers of that.”

Simon Webb, Managing Director of Capital Markets and Finance at LiveMore said “While the Bank of England has held rates again, the outlook for borrowers is far from certain. With inflation now at 3.1%, and energy prices creating further uncertainty, there is a real risk that rates remain higher for longer than many households had hoped.

“For older borrowers, the implications could be particularly significant. Those approaching or already in retirement may be refinancing on different incomes and over different timeframes to younger borrowers, while also facing rising household costs. A relatively small change in mortgage rates can therefore have a meaningful impact on affordability.
“At the same time, more homeowners are reaching later life with significant wealth tied up in their property. As the later-life lending market continues to grow, housing wealth will increasingly form part of the conversation around how people manage their finances in retirement.

“This makes it increasingly important that affordability is considered in the context of an individual borrower’s full financial circumstances. At LiveMore, we consider a wider range of possible income streams than traditional high street lenders, helping older borrowers access lending solutions that reflect their circumstances and requirements in later life.”

John Fraser-Tucker, Head of Mortgages at Mojo Mortgages said “With UK inflation rising to 3.1%, driven largely by global energy pressures and rising fuel costs, the Bank of England’s decision to hold the base rate at 3.75% for the 6th Bank of England meeting since December 2025 (when the base rate was set at 3.75%) came as a slight surprise.

“While borrowers were hoping for further rate cuts following the easing seen earlier this year, sticky inflation has made policymakers proceed with caution. If anything, a rate increase was much-anticipated so the decision today has been subject of keen interest to our advisors.”

Neil Rudge, Chief Banking Officer at Shawbrook, said “A hold was widely expected, but no business owner will mistake it for certainty. Inflation is edging back up, energy costs remain volatile, and the debate is shifting from when rates might fall to when rates will rise and by how much. That is a very different backdrop from the one business leaders were planning for at the start of the year.

“For medium-sized businesses, that uncertainty does not stay abstract for long. It quickly becomes a harder call on a new site, a new machine or a new hire. But the answer is rarely to wait for clarity that may not come. Opportunities to acquire, expand capacity or exit do not simply wait for the rate cycle to settle.

“The right response is to plan and structure investment around the uncertainty, rather than sit it out. These businesses make up the UK’s critical middle, and they need lenders willing to back sound plans through difficult conditions, not only once the uncertainty has passed.”

Anna Leach, Chief Economist at the Institute of Directors, said “The MPC were again expected to vote for a hold today, with the same three dissenters from that position as last time. The minutes really highlight just how complicated the MPC’s balancing act is becoming. On the one hand, they note that there is still little sign that price pressures are spreading across the economy, that services price inflation – a key indicator of domestic price pressures – has dropped further and that financial conditions have already tightened anyway (the language of ‘full and fast’ pass-through is striking).

“But on the other hand, growth has been stronger than expected, energy prices are closing on the adverse scenario and, if higher prices persist, inflation is expected to exceed 4% just as the majority of wage negotiations are underway – a rate at which inflation risks start rising more sharply.

“The language of the minutes is striking. Back in July, the MPC judged the risk of strong inflationary pressures as greater than the risk of weak ones. Their outlook for the Middle East conflict has moved towards the adverse scenario and the risk of second-round effects has increased. There’s mention too of further pressures from AI supply constraints and El Nino. Economic conditions are certainly getting tougher and that sharpens the need to keep the forthcoming Budget laser focussed on reinforcing the decisions which will deliver growth.”

Suren Thiru, ICAEW Chief Economist, said “By keeping interest rates on hold, policymakers have chosen patience over panic, balancing the inflationary fallout from the Iran war-induced energy shock against little evidence that it is fuelling more persistent, economy-wide price pressures.

“While the vote split was unchanged, the tone of the meeting minutes points to a hardening of hawkish sentiment within the committee amid mounting inflation concerns, keeping the door wide open to a November rate rise.

“Interest rates are at a critical cliff-edge moment. While policy could still remain on hold this year, persistent US-Iran hostilities mean the risk of a rate hike has shifted from a possibility to a probability.

“Rate-setters will likely keep a close eye on next month’s Budget and the inflationary impact of any policy announcements before deciding their next move on interest rates, particularly given continued bond market volatility.”