Interest rates remain at 4% – consumer credit reaction

The Bank of England Monetary Policy Committee (MPC) has voted to hold interest rates at 4.0%.

Commenting on the MPC’s decision not to change the Bank Rate Paul Broadhead, Head of Mortgage and Housing Policy at the Building Societies Association said “CPI Inflation has remained elevated at 3.8% and is expected to stay higher for longer, so it’s no surprise that the MPC has decided to hold the rate at 4.00%. A further cut this year is still possible, but the outlook for the Bank Rate is now far less certain.

“For many would-be first-time buyers another Bank Rate cut couldn’t come soon enough. Despite the availability of innovative mortgages from building societies to help those with smaller deposits, and recent regulation changes enabling lenders the flexibility to lend to more borrowers, mortgage affordability remains one of the biggest barriers to homeownership.  Our research shows 61% of first-time buyers¹ citing this, with mortgage repayments for new buyers around 30% higher than five years ago, rising from 18% to 22% of income².

“While affordability pressures remain, having good savings habits can help all households build resilience against financial shocks. Next week is UK Savings Week where building societies, credit unions, banks, charities and many other organisations will come together to encourage families and individuals to make the most of their money. With almost £300 billion of savings sitting idle in accounts paying no interest, simply moving money could put hundreds of pounds into people’s pockets.”

John Fraser-Tucker, Head of Mortgages at mortgage broker Mojo Mortgages said “Today the Bank of England voted to hold the base rate at its current level. For mortgage customers, the decision provides a measure of stability, but it also means borrowing costs remain broadly where they are for now.

“For homeowners due a remortgage or product transfer, there’s no immediate cut in rates to ease the pressure. Tracker customers will see no change in their monthly payments – good news if you feared an increase, but no reduction either. Those coming to the end of a fixed deal still face a different challenge: the market is pricing in that rates will stay higher for a while, so the competitive fixed-rate products available today may not fall significantly in the short term. If your deal expires within the next six months, it’s worth exploring your options early so you can lock in a rate before any market movements.

“For prospective buyers, today’s announcement keeps the mortgage landscape much the same. Affordability remains tight: lenders continue to stress-test applications at current levels and there’s no sudden drop in borrowing costs to widen budgets. On the upside, a steady base rate can calm market volatility, giving lenders confidence to keep offering competitive products. That can make it easier to plan a purchase without worrying that rates will spike unexpectedly.

“Our view is that while today’s decision doesn’t bring immediate relief, it does offer predictability. Whether you’re reviewing an existing mortgage or planning your first purchase, now is the time to get professional advice and compare the best products available. Securing a competitive rate early can protect you against future uncertainty and help you budget with confidence.”

John Phillips, CEO of Just Mortgages and Spicerhaart, said “Even with the shock news on inflation yesterday, a hold on the base rate comes as no surprise. We know the central bank prefers its careful, gradual approach to monetary policy and with a cut last month, stubborn inflation and fierce headwinds at home and abroad, they are not likely to deviate just yet. Whether this leads instead to a November cut is still too early to call – while the economy is stagnating and needs an urgent boost, we just don’t know yet if inflation has peaked and what impact the upcoming Autumn Budget will have.

“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. While the picture ahead is still unclear, brokers are continuing to deliver real value to clients in navigating the market today – exploring options, nurturing confidence and providing a five-star service.”

Simon Webb, Managing Director of capital markets and finance at LiveMore, said “The MPC’s decision to hold the base rate at 4% has been widely expected as the Bank juggles persistently high inflation and weak growth. While borrowers will always welcome cuts, this stability gives lenders and intermediaries the space to plan with greater confidence.

“All eyes will now be on November’s Budget and the impact that might have on the housing market and the potential for further rate cuts before the end of the year. Later life lending is set for continued growth. Increasing demand and awareness create clear opportunities to help older borrowers with solutions designed to meet their individual needs.”

Ryan McGrath, Director of Second Charge Mortgages at Pepper Money, said “Today’s decision to maintain the status quo provides welcome stability for borrowers, particularly those on tracker products who won’t see immediate changes to their monthly payments. It also maintains a favourable environment for secured loans, allowing customers to access competitive rates without disturbing their existing mortgage arrangements.

“This steady approach from the Bank of England reinforces the value of second charge lending for homeowners looking to fund major life events or consolidate debt without adding exponentially to their monthly outgoings. In fact, customers who consolidate debts with a secured loan could reduce their outgoings by at least £600* on average.

“With the second charge market seeing strong growth over the past year, on track to reach £2bn of lending in 2025, it’s clear that more consumers are recognising the benefits. But there’s still work to do to ensure all homeowners are aware of the options available to them when managing their finances.”