Bank of England to hold interest rates at 3.75%
Following the Bank of England’s decision to hold interest rates at 3.75%, here are some thoughts from the Industry.
Matt Smith, Rightmove’s mortgages expert says:
“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.”
Neil Louth, CEO of The Acorn Group (part of LRG)
Overview
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.
Across LRG and The Acorn Group we have had a strong start to the year, with buyer activity and viewing numbers rising. London specifically has been more resilient than some headlines suggest, with agreed new sales up 10% in January year-on-year, 13% more properties on the market and 38% more new buyers registering. And we’ve seen similar momentum across our Home Counties brands such as Chancellors, Gibbs Gillespie and Romans.
The reason interest rates are being held
Despite a very positive start to the year in property sales, there are external factors at play which prevent the Bank from following December’s cut with a further cut so soon. Inflation has risen slightly again – CPI rose to 3.4% in the year to December 2025, from 3.2% in November; wage growth is predicted to rise by 3.6% in 2026, and geopolitics remains unpredictable. Understandably, the Bank is reluctant to cut quickly then U-turn later.
What it means for mortgages and affordability
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.
Those coming off fixed deals are, in many cases, refinancing into a better rate than they feared a year ago. That great news for second-steppers and aspirational moves, not just first-time buyers. And most importantly it keeps property chains in tact.
A message to buyers and sellers
Interest rates are expected to remain at around 3.75% in the near term, providing welcome stability for those planning a move. At the same time, improving affordability and increased choice mean more buyers are finding that the homes they want are both achievable and available.
Looking ahead
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.
In the meantime, the market is functioning well for buyers and sellers alike and as the year progresses we expect to be assisting not just those who had to move through necessity (as we did last year) but increasingly aspirational movers too.
Sarah Thompson, Group Financial Services Director, Mortgage Scout, part of LRG
“The decision to hold the base rate comes as no real surprise and reflects a period of growing stability rather than uncertainty in the mortgage market. While inflation crept up slightly at the end of last year, it is still expected to fall back towards the Bank of England’s target later in 2026, which keeps the door open for further rate cuts this year.
“Mortgage rates remain broadly stable. Where we have seen small increases from some lenders, this appears to be linked to stronger application volumes rather than a shift in economic outlook. Confidence in the sales market has improved at the start of the year, with recent house price data showing modest growth and transaction activity picking up after a quieter end to 2025. As a result, some lenders seem to be making marginal pricing adjustments to help manage volumes and protect service levels, rather than reacting to inflation or base rate expectations.
“The more meaningful shift is in affordability. Lenders are becoming increasingly flexible, with income multiples of 6, 6.5 and in some cases 7 times income now achievable depending on circumstances. Combined with steady pay growth and more measured house price increases, this is giving borrowers greater headroom and more confidence to move or refinance.
“With a large number of homeowners coming to the end of fixed-rate deals this year, we are also seeing more people proactively exploring options rather than staying with their existing lender. Remortgaging volumes are expected to grow strongly this year, and those who take the time to review their options will tend to find better value and greater flexibility than they expect. This is why advice really matters.”
Paresh Raja, CEO of Market Financial Solutions, said:
“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.
“The market is in a strong position. The data suggests that transactional activity is still somewhat subdued, 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 of RAW Capital Partners, said:
“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. We are also now well into Labour’s second year in power, which has meant a little less uncertainty around policy direction and potential reform. As a lender, the focus is on removing friction from the finance process for brokers and borrowers so we can ensure this uptick in confidence and calming of conditions translates into market activity, which we expect to see in the weeks ahead.”
Daniel Austin, CEO and co-founder at ASK Partners, said:
“The Bank of England’s decision to hold rates at 3.75% underlines the ‘higher for longer’ reality facing households and property markets. While policymakers are signalling cuts later this year, the recent uptick in inflation shows the path back to target won’t be linear, and that’s keeping confidence fragile among buyers and developers alike. Mortgage pricing has improved and any further easing will be welcome, but it will take time for meaningful relief to filter through to monthly costs.
“In the meantime, mainstream housing activity is likely to remain subdued, with capital continuing to favour structurally resilient, income-led sectors such as build-to-rent, co-living, logistics, storage and data centres where undersupply supports demand. A clearer downward trajectory for inflation and rates moving sustainably lower would be the real catalyst for unlocking stalled projects. Until then, disciplined, income-focused and debt strategies offer a pragmatic way for investors to stay active while managing risk.”
Susannah Streeter, Chief Investment Strategist, Wealth Club,
‘’The Bank of England has pushed a big red pause button on interest rate cuts as caution remains the name of the game and policymakers assess flickering growth and stubborn inflation. Although the signs are that the price spiral will be dampened down in the coming months, they’ve judged that it’s still too early to move, especially given signs that growth in the economy is showing tentative signs of making a comeback. The latest PMI snapshot showed activity accelerating with Budget blues being cast aside. Plus, with headline inflation ramping up at the last count, and wage growth still uncomfortable, it’s not a clement environment for interest rate cuts. Still, it was a closer call than expected, and it puts a cut in March still very much in the picture. The labour market is showing weakness, Budget changes are set to bring down energy and transport costs and a wave of cheaper Chinese goods are heading this way. So, more policymakers could well be swayed to vote for lower borrowing costs next month.
But these are volatile times, with the overall outlook in a state of flux, given ongoing geopolitical tensions, erratic US trade policy, and a tech sell off roiling markets. So, the Bank’s decision makers will still want more clarity on what could be ahead, before tinkering with borrowing costs again.‘’
Guy Gittins, CEO of Foxtons, commented:
“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, Managing Director of mortgage adviser, Alexander Hall, commented:
“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 of specialist lender, Octane Capital, commented:
“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 percent 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 of Jefferies London, commented:
“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 enables buyers to plan acquisitions with greater certainty over the months ahead.”
Marc von Grundherr, Director of Benham and Reeves, commented:
“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.”
Verona Frankish, CEO of Yopa, commented:
“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.”
Nathan Emerson, CEO of Propertymark, comments:
“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.”
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