As predicted, the Monetary Policy Committee has erred on the side of caution and has voted to keep the base rate on hold.
5th Feb 20260 1,522 11 minutes read Simon Cairnes
The Bank of England has voted today to keep the base rate on hold at 3.75%, a decision widely anticipated by markets and industry experts as policymakers try to keep a balance between stubbornly high inflation and the need to boost a flagging economy.
Inflation climbed to 3.4% in December, up from 3.2% in November, against a target rate of 2% and was the first increase in five months. The rise was driven by higher energy costs and services inflation. In addition, even though unemployment was stuck at a four-year high of 5.1% in the three months to November, wage settlements remain elevated at 3.5%, adding yet more upward pressure on inflation.
Cautious approachAt the same time, the current high borrowing costs are weighing on activity, and economists are expecting the Bank to trim its near-term growth outlook for the UK. Despite the pressure to give the economy a boost, the Monetary Policy Committee (MPC) are wary of cutting rates too quickly after December’s reduction from 4%, as a premature easing could reignite inflationary pressures before price growth is firmly under control. It is why, for the time being, the MPC is adopting a wait-and-see approach.
The decision means attention will now turn to the Bank’s next meeting on 19 March, with traders betting on a 72% probability of a reduction by the end of April. Expectations for the rest of the year are divided, with many economists forecasting one further reduction and some expecting two if wage growth slows and inflation resumes its downward path.
The Bank says of its decision: “Inflation has fallen a long way from its peak of over 10% three years ago, and we now expect it to be back to our 2% target this spring.
There should be scope for some further cuts to Bank Rate this year.”
“Monetary policy is being set to balance the risk that higher inflation is more persistent against the risk that weaker labour demand and household spending take inflation below target.
“If the economy and the outlook for inflation evolve as we expect, there should be scope for some further cuts to Bank Rate this year. But we’ll have to judge the latest information and data at each of our meetings and set whatever interest rate is necessary to make sure that inflation stays low and stable.
Industry reaction
Paul Hardy, MD, LSL Property Services
Paul Hardy, Managing Director at LSL Estate Agency Franchising:
“The decision to hold interest rates at 3.75% provides welcome stability for the housing market as we move forwards into 2026. With competitive sub-4% two- and five-year fixed mortgage rates already available, this certainty around the base rate should further boost confidence among both buyers and lenders.
“While the year has seen a slightly slower start – perhaps unsurprising given the loss of the first weekend and wetter-than-normal weather – there is time for the market to pick up. Against that backdrop, interest rate stability is particularly encouraging, helping to underpin activity and support a gradual build-up of momentum in the months ahead.”
Neil Louth, CEO, The Acorn Group.
Neil Louth, CEO of The Acorn Group (part of LRG):
“While the Bank of England holding interest rates at 3.75% isn’t headline news, but it does give buyers, sellers and lenders the steady footing they’ve been asking for, for many years. It will also help maintain the substantial momentum that we’ve seen in the market recently.
“The good news for home movers is that the mortgage market does not wait for the MPC. Lenders have already been repricing, competition is back and we are seeing sharper two-year and five-year fixed rates. Affordability testing is easing too, which can help buyers access higher borrowing multiples.“Over the longer term, we anticipate a gradual easing in rates, with Bank Rate trending towards around 3–3.25% by the end of 2026. This steady improvement should continue to support affordability and encourage sustainable, confident market activity — rather than sudden or disruptive change.”
Paresh Raja, CEO, Market Financial Solutions
Paresh Raja, CEO of Market Financial Solutions:
“Given the historic lows we saw between 2008 and 2022, it’s understandable that there remain loud calls for the base rate to fall further and further. But a mindset shift is perhaps required – the Bank of England is not going to rush to cut the base rate, and when we zoom out and look at the last three or four decades, we see that the cost of borrowing today is highly competitive.
“Positively, we are seeing greater pragmatism, with brokers and borrowers having adapted well to the rates on offer across the mortgage market, aided by the fact that these rates have been largely stable for more than a year.
but prices are holding firm and we’re certainly seeing healthy levels of demand among buyers and investors across the country. Base rate movements will always be influential, but should not overshadow broader market conditions, nor the need for lenders to double down on supporting clients to get deals done rather than waiting for the Bank of England’s policymaking to shift.”
Tim Parkes, CEO, RAW Capital Partners
Tim Parkes, CEO of RAW Capital Partners:
“Having done so just before Christmas, a second consecutive base rate cut was always very unlikely; it would have been at odds with how the Bank of England has approached the challenge of reducing borrowing costs over the past two years.
“Slow and steady seems to be the unofficial motto, especially with inflation remaining sticky. That said, it is expected that the base rate will fall further in 2026, and conditions have improved for UK borrowers.
“The opening five weeks of the year have, from our perspective, been far busier and more positive than the same period in 2025. There is greater confidence among buyers, and with rates having fallen in the past 12 months, demand seems higher.”
Darrell Walker, Group Sales Director, Chetwood Bank
Darrell Walker, Group Sales Director at Chetwood Bank for ModaMortgages and CHL Mortgages:
“The MPC has taken a steady and cautious approach to reducing the base rate so far, and the mixed economic picture heading into today’s decision, meant lenders had already priced a hold into their rates. As a result, we’re not expecting to see much of an immediate impact – either positive or negative – in response to the decision.
“That is not a problem. Stability will allow the market to build on some of the modest momentum that we’ve seen in recent weeks. While a cut will likely have accelerated some decision-making, it feels as though seasonal trends are having the greatest influence on activity at the moment. Although transactions and deals may not be completing at pace right now, asking price data suggests the market could be poised for meaningful growth once the monetary environment is relaxed.
“We’re expecting the Bank of England to signal that it will move in this direction in the coming months. But, in the meantime, we will continue to prioritise flexibility and certainty to ensure brokers and their clients have the products and support they need to get deals over the line.”
Nathan Emerson, Chief Executive, Propertymark
Nathan Emerson, CEO of Propertymark:
“Today’s decision to hold interest rates reflects the Bank of England’s cautious approach in the face of ongoing economic uncertainty. While we would ultimately welcome lower borrowing costs, stability at this stage gives buyers and sellers clarity about the cost of borrowing and allows the market to continue adapting.
“For those planning moves, knowing that many mortgage products are unlikely to change in the immediate term can provide space to make informed decisions about house purchases or remortgaging.”
Verona Frankish, CEO, Yopa
Verona Frankish, CEO of Yopa:
“While today’s decision to hold interest rates may have disappointed those homebuyers hoping for further reductions to mortgage rates, it is unlikely to dampen market activity, with many buyers remaining keen to progress their plans this year, having gained confidence from stabilising interest rates over the course of the last year.”
Guy Gittens, CEO, Foxtons
Guy Gittins, CEO of Foxtons:
“Today’s decision to hold the base rate is unlikely to disrupt a property market that has, once again, started the year positively.
With further rate cuts anticipated in 2026, buyer confidence remains high, and we’ve seen the expected seasonal uplift in enquiries, viewings booked and offers being made. We anticipate this positive momentum from buyers and sellers will be sustained, creating a strong platform for the year ahead.”
Richard Merrett, MD, Alexander Hall
Richard Merrett, Managing Director of mortgage adviser, Alexander Hall:
“Today’s decision to hold the base rate is unlikely to dampen the market momentum that has been building in recent months, and we’ve already seen a noticeable increase in activity following the cut in December, with buyers hitting the ground running in the new year with a renewed sense of confidence.
This confidence has been mirrored by lenders, who continue to offer greater product choice and more flexible terms, particularly when it comes to loan-to-income multiples. As a result, the average homebuyer is now around £1,000 better off each year when it comes to the cost of their mortgage repayments when compared to just 12 months ago.”
Jonathan Samuels, CEO, Octane Capital.
Jonathan Samuels, CEO of specialist lender, Octane Capital:
“No news is good news in the grand scheme of things, and today’s decision to hold the base rate provides welcome consistency for both lenders and borrowers, particularly given the fact that inflation climbed in December and remains higher than the Bank of England’s two per cent target.
With this considered, a static base rate should provide lenders with the confidence to maintain competitive product ranges and pricing, whilst it also allows borrowers to plan with greater certainty. This will create a supportive environment for buyers and investors alike, helping to sustain activity and confidence across the property market.”
Damien Jefferies, Founder, Jefferies London Prime Real Estate
Damien Jefferies, Founder of Jefferies London:
“Today’s decision to hold the base rate bolsters stability for international and high-net-worth buyers who are actively assessing opportunities in the UK market, with consistency in monetary policy helping to reinforce confidence and predictability when allocating capital across global property markets.
With borrowing costs remaining broadly stable, the UK continues to present an attractive proposition, and this should support continued cross-border investment and enable buyers to plan acquisitions with greater certainty over the months ahead.”
Marc von Grundherr, Director, Benham & Reeves
Marc von Grundherr, Director of Benham and Reeves:
“The housing market has continued to demonstrate strong levels of activity so far this year, with the December rate cut helping to put homebuyers firmly on the front foot heading into 2026.
As a result, enquiry levels, viewings, and transaction volumes have remained robust, underpinned by improving confidence and more stable economic conditions, with today’s decision to hold the base rate unlikely to rock the boat.”
Nick Leeming, Chairman, Jackson-Stops
Nick Leeming, Chairman of Jackson-Stops:
“Today’s decision to hold interest rates comes as no surprise. Two consecutive cuts would have been unusual given the Bank of England’s cautious approach amid rising inflation, which unexpectedly climbed to 3.4% last month. December’s rate cut was the latest in a series of reductions last year, reflecting the MPC’s careful balancing act between slow economic growth, high wages and rising unemployment.
“For homeowners coming off fixed-term mortgages this year, this stability offers some certainty around borrowing costs, although rates still remain higher than a few years ago.
“From a market fluidity perspective, steady interest rates could temper the urgency to move, as affordability pressures persist, but it may also encourage buyers and sellers to plan their next move with confidence that borrowing costs won’t spike immediately.”
Ryan McGrath, Director of Second Charge Mortgages, Pepper Money
Ryan McGrath, Director of Second Charge Mortgages at Pepper Money:
“Holding the base rate at 3.75% acts as a speed bump for borrowers who might have been banking on consecutive cuts after December. With inflation ticking up slightly, the Bank is clearly signalling that the route back to lower rates will be gradual, not a straight line.
“For homeowners, this pause means the pressure lingers a bit longer. Anyone coming to the end of a fixed-term deal is still looking at a sharp jump in payments compared to the rates they secured five years ago. In that context, a full remortgage remains an unappealing, and often expensive, move for many.
“This is where second charge mortgages continue to prove their worth. Instead of disturbing a low-interest first charge mortgage just to raise capital or consolidate debt, homeowners can use a second charge to access equity. It’s a practical way to manage finances efficiently without exposing the entire mortgage balance to today’s higher rates.”
Andrew Lloyd, Managing Director of Search Acumen
Andrew Lloyd, Managing Director of Search Acumen:
“Holding the base rate at 3.75% forces it in line with the majority of expectations in the market at the moment. After December’s cut, few were geared up for a further loosening of policy, and the recent inflation figures have further consolidated this view.
“For the commercial real estate sector, this decision means the recovery in transaction volumes will be gradual rather than immediate. Investors are ready to deploy capital, but with borrowing costs staying put for now, we expect a continued period of price discovery as buyers and sellers try to align their expectations.
“That said, stability has its own value. A hold allows firms to plan with a degree of certainty. The smart money isn’t waiting for the bottom of the market; they are using this time to conduct thorough due diligence and get their data in order, ensuring they can move quickly when the next window of opportunity opens later in the spring.”
Matt Smith, Mortgage Expert, Rightmove
Matt Smith, Rightmove’s mortgages expert:
“Today’s Bank Rate hold was widely expected given underlying inflation and wage growth data, and it’s currently likely we’ll see the next Bank Rate cut in June.
“Average mortgage rates have remained pretty steady over the last couple of weeks, despite the underlying cost of funding mortgages becoming more expensive to lenders.
“This is why some lenders have increased rates slightly over the last few days, but we’re seeing lenders try to remain as competitive as they can at a busy home-moving time of year.
“We’re still seeing some of the cheapest rates around since before the mini-Budget. We’re seeing an encouraging start to the year for home-moving activity, with many home-buyers taking advantage of lower mortgage rates and stable house prices to make their move.”
Colin Bell, Founder and COO, Perenna
Colin Bell, Founder and COO of Perenna:
“A hold will feel disappointing to some, but it reflects the reality borrowers are already living in: higher rates are no longer a temporary phase. They are here to stay as inflation remains sticky, and for many households, it is simply better to opt for long-term certainty now than to keep holding out for a quarter-point cut later in the year that will make little difference to their monthly finances.
“It’s increasingly clear that rate decisions alone aren’t shifting the dial on homeownership. The average first-time buyer is now well into their thirties, and around a third of renters aged 25–44 say they don’t expect to ever own a home. That tells us the challenge isn’t whether the base rate has moved this month, but whether the system is actually opening the door rather than leaving people knocking.
“We need to stop treating rate cuts as the solution and focus instead on products and policy that give borrowers more control, flexibility and longer-term stability. That’s where real progress will come from.”
Iain McKenzie, CEO, The Guild of Property Professionals
Iain McKenzie, CEO of The Guild of Property Professionals:
“The Bank of England’s decision to hold the base rate at 3.75% comes as no surprise. Following the cut in December and with inflation still running hotter than the Bank would like, a pause was widely expected. What’s more important is the direction of travel, and we still expect rates to edge down gradually over the course of the year.
“The market has started the year on a far more stable footing, with buyers returning as confidence improves and mortgage rates settle at levels lower than last year. Intense competition between lenders has been a real positive, expanding mortgage choice and giving buyers greater flexibility. This increased choice is particularly beneficial for first-time buyers taking their initial step onto the property ladder.
“While affordability remains a stretch for many, lower mortgage rates combined with rising incomes mean mortgage costs as a share of income are at their lowest for several years. At the same time, a growing supply of homes is giving buyers more choice and keeping prices in check. This sets the foundations for healthier transaction levels into 2026, provided sellers price realistically and reflect local market conditions.”
Tagsbank base rate 5th Feb 20260 1,522 11 minutes read Simon Cairnes Share Facebook X LinkedIn Share via Email