The Bank of England has just announced that the interest rate will be held at 4%.
Here we’ll look more closely at their decision – and at what it means for your mortgage and the wider property market.
The latest BofE decision was the most hotly anticipated of the year so far.
It kept us all on the edge of our seats until the very last minute.
Experts were split on what would happen with the Bank Rate – the official name for the interest rate – this month.
Some forecast it would remain unchanged. Some expected a cut.
Why has the rate been held?
The economy and the inflation rate were likely key factors.
But both are sending out some very mixed messages now.
Last month’s inflation figures were a smidgin better than forecast.
However, at 3.8%, inflation is still almost double the 2% target the BofE is aiming for.
Usually, this could see rates not just held but ramped up to try and put the brake on inflation.
The economy is sluggish, with GDP growth of only 0.3% in the last quarter. The job market is also in need of a boost, with unemployment rising to 4.8% – the highest level since the pandemic began.
Usually, statistics like these might prompt the interest rate to be slashed to help stimulate growth.
How this might affect your mortgage
Remember that lenders consider many factors, not just Bank Rate, when setting your actual mortgage rate.
They take into account swap rates (in simple terms, the rate at which banks lend money to each other) and the pricing of gilts, or government bonds.
They also get their crystal balls out and price Bank Rate changes into their actual mortgage rates before they happen.
If you have a fixed-rate mortgage, your interest rate and your payments won’t change until the end of the fixed term.
If you have a tracker mortgage that follows Bank Rate, your rate shouldn’t change either.
If you have a standard variable rate mortgage, your rate may also remain unchanged. (But don’t bank on it. Lenders don’t have to keep these in step with Bank Rate.)
If you’re a first-time buyer or looking to remortgage, lenders may become slightly more competitive with their new mortgage rates in anticipation of a future rate cut.
According to Moneyfacts, average mortgage rates are now under 5% – the lowest level since September 2022.
(NB. This article isn’t financial advice. Consult an expert financial adviser if you need mortgage advice - we can point you in the right direction.)
Where is the rate going next?
Right now, the Bank Rate is higher than many expected it to be when we cracked open the champagne last New Year’s Eve.
Some experts, such as Goldman Sachs, even predicted it could end 2025 at as low as 3%.
Today’s decision makes it more likely that the next rate announcement, on 18 December, will be a cut to 3.75%.
Don’t bet your house on it, though.
Rachel Reeve’s Budget – on 26 November – could set a few cats amongst the pigeons. Tax rises are looking increasingly likely. That could push inflation down but also put the brakes on the economy.
How this might affect the property market
Despite today’s decision, it’s fair to say that the trend in mortgage costs seems very firmly downwards.
That means home movers and first-time buyers can sit down, plan their finances, and make an informed decision about buying and selling. With some certainty that 2026 won’t bring any nasty mortgage rate surprises.
Although today’s decision was to hold the Bank Rate, it can still be seen as a positive development, both for the broader property market and for homebuyers and sellers alike.
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