The Bank of England has maintained the existing interest rate for the seventh time in a row.

UK interest rates have not moved since the Bank of England raised them to 5.25% last August.

The decision to freeze rates again comes as inflation, which measures price rises over time, falls back to the 2% target, as revealed yesterday.

As well as the interest rate decision, the Bank has just released its latest forecast estimating what will happen to inflation and the UK economy.

The Bank of England governor Andrew Bailey believes that it is not yet the time to reduce interest rates.

Markets are only fully pricing in a cut in September, but many economists had hoped that the Bank would make a move this month to cut rates.

One last hold in June? There is still a chance that rates could be reduced when the bank’s Monetary Policy Committee meet in August. In a sign the central bank may be getting closer to cutting rates, the BoE policy minutes said the decision had been “finely balanced”.

Industry reaction:

Jeremy Leaf, north London estate agent, said: “Although a cut to base rate would give some added impetus to the housing market following the uncertainty which the election announcement inevitably brought, no change was expected.

“Inflation is thankfully falling but it is early days as pressures remain in wage growth and the services sector in particular.

“Hopefully, lenders will sense that a drop in base rate is coming sooner rather than later and begin reducing their mortgage rates, however marginally, in anticipation which will certainly improve confidence.”

Nathan Emerson, CEO of Propertymark, commented: “For the housing market it is vital there is further confidence regarding the long-term trajectory of inflation, and this is a stance the Bank of England has remained very open about before any commitment is made to start reducing the base rate. Propertymark remain keen to see rates reduced when circumstances allow and for this to then translate into competitive mortgage deals from lenders at the first opportunity. We have seen a much-needed progress since the start of the year regarding the housing market and it is vital that stability is maintained.”

Tony Gambrill, regional sales director at Chestertons, says: “Property buyers have been waiting for interest rates to go down for months and will feel deflated after the Bank of England did not announce a rate cut despite inflation dropping to its 2% target. Still, we are seeing some buyers proceeding with their purchase now, regardless of interest rates, as they expect any rate cut to trigger an uptake in buyer activity that will inevitably boost property prices. To avoid having to pay more for their property further down the line, these buyers act now as they predict the difference they can save between current and future asking prices to be greater than the savings to be had by lower interest rates.”

Tony Gambrill, regional sales director at Chestertons, noted: “Property buyers have been waiting for interest rates to go down for months and will feel deflated after the Bank of England did not announce a rate cut despite inflation dropping to its 2% target. Still, we are seeing some buyers proceeding with their purchase now, regardless of interest rates, as they expect any rate cut to trigger an uptake in buyer activity that will inevitably boost property prices. To avoid having to pay more for their property further down the line, these buyers act now as they predict the difference they can save between current and future asking prices to be greater than the savings to be had by lower interest rates.”

Iain McKenzie, CEO of The Guild of Property Professionals comments: “In light of the Bank of England’s decision to keep interest rates unchanged, it’s clear that while inflationary pressure is easing, there are still other factors at play that influenced this choice. Although buyers and sellers will have to wait a little longer to see an interest rate cut, the property market continues to see steady recovery as buyer demand, transactions levels and prices show growth. When it does happen, a rate cut will bring mortgage rates down, providing much-needed relief while boosting market confidence further.

“While it did not happen today, there is widespread expectation for the base rate to be cut imminently, with economists from Capital Economics forecasting a reduction to 4.5% by the end of 2024. This optimistic economic outlook has propelled consumer confidence in May to its highest level since December 2021.

“Despite borrowing costs being higher compared to the ultra-low rates of previous years, the recent economic stability has reassured homeowners about their mortgage affordability, and they stand to benefit from the expected rate cuts.

“While all eyes will be focused on the upcoming election and potential impact it will have on the property market, experts suggest that its effect will be minimal, and it is not expected to disrupt the usual seasonal transaction patterns. It is highly likely that the first interest rate drop will have more of an impact on market activity than the upcoming election.”

Ed Phillips, CEO of Lomond, commented: “Stability has been key to the returning health of the UK property market in recent months and this stability has come by way of a freeze on interest rates since last September.

“While the nation’s homebuyers will have been hoping for a reduction today, the decision to keep the base rate at 5.25% will, at least, continue to steady the ship.

“This should help to further boost the growing levels of buyer activity that have been building in recent months and ensure that the year ahead is a far more positive one for the market compared to the uncertainty of last year.”

Tom Bill, head of UK residential research at Knight Frank, said: “The UK housing market is still waiting for the first cut in more than four years, which will keep mortgage rates and sentiment in check over the summer. Stubborn services inflation means any cut may not happen until early autumn but if mortgage rates fall in anticipation and stability returns to Westminster, we can expect higher levels of activity in the final four months of the year, which should push average UK prices 3% higher over the course of 2024.”

Marc von Grundherr, director of Benham and Reeves, commented: “No news is good news with respect to today’s decision and the certainty that will come from another hold on the base rate is certainly better than the string of consecutive hikes seen in recent years.

“We’ve seen mortgage approvals top 60,000 approvals per month for three consecutive months now and this demonstrates that buyer confidence has been buoyed by the stability provided by a hold on the base rate.

“With the election unlikely to dampen this growing market momentum, the UK property market remains in a very strong position, particularly with the prospect of a cut on the horizon.”

Verona Frankish, CEO of Yopa, added: “With a seventh consecutive hold on the base rate we look set to enjoy a summer of stability and we’ve already seen the housing market respond with an uplift in both buyer and seller activity.

“While the election may take centre stage over the coming weeks, it’s unlikely to dampen current market enthusiasm and the outlook for the year ahead is a very positive one considering we’re yet to see a reduction in interest rates.”

“Stability has been key to the returning health of the UK property market in recent months and this stability has come by way of a freeze on interest rates since last September.

“While the nation’s homebuyers will have been hoping for a reduction today, the decision to keep the base rate at 5.25% will, at least, continue to steady the ship.