There’s already widespread expectation that the next Bank of England’s meeting – one week before Christmas – will give the housing market a festive gift in the shape of a base rate cut.
Yesterday’s decision to hold base rate at 4.0% was on the knife-edge – five members of the Monetary Policy Committee in favour, while four wanted a 0.25% cut.
September’s lower-than-expected inflation, softer wage growth, and clear signs of slowing activity in the third quarter have strengthened the case for the Bank of England to move towards cutting interest rates in December.
Nigel Green, the chief executive of financial advisory service deVere Group, says: “The Bank’s decision to hold was always expected, but the debate is now shifting rapidly towards when the first cut comes. The combination of three consecutive months of 3.8% inflation, slowing wage growth, and weakening consumer demand points to an economy that is losing momentum. That should focus minds on a December move.”
The Bank’s decision came only three weeks ahead of the Budget, where it is expected that taxes will rise further.
Bank governor Andrew Bailey says: “We held interest rates at 4% today. We still think rates are on a gradual path downwards but we need to be sure that inflation is on track to return to our 2% target before we cut them again.”
The Bank said it expected food price inflation to remain higher this year before slowing in 2026, citing higher global agricultural prices.
“Households continue to change their shopping habits to reduce spending, such as buying more vegetables and reducing meat consumption,” it reported.
It said fashion retailers were reporting falling sales “due to competition from the second-hand market”, adding that accommodation providers were seeing shorter stays and restaurants faced “weak demand” with lower spending per visit.
It also said childcare costs and caring obligations were leading some people to reduce their working hours or “even stop working”.
The Bank forecast the unemployment rate would hit 5% in the final three months of the year and remain around that level until 2028.