At noon local timeon November 6, the Bank of England’s Monetary Policy Committee (MPC) voted 5–4 to keep the benchmark interest rate unchanged at 4%, in line with broad market expectations.
Although the current inflation rate of 3.8% remains well above the 2% policy target, the central bank has clearly stated that inflation has peaked. Moreover, Governor Andrew Bailey’s decisive vote has sent a strong signal that rate cuts will follow once a confirmed downward inflation trend is in place. The market is now widely anticipating a potential policy easing as early as December 18.
At the same time, uncertainties surrounding the Autumn Budget scheduled for November 26, together with sluggish economic growth, continue to weigh on the housing market in the short term.
I. Rates on Hold: Anchoring the Turning Point While Balancing Monetary and Fiscal Policy
The Bank of England’s decision to hold rates reflects a cautious approach to verifying the downward trend in inflation.
In its latest Monetary Policy Report, the Bank maintained its assessment that September’s 3.8% reading marked the inflation peak. It emphasized that “the risks of persistent inflation have eased, while weak demand poses a more significant risk to medium-term inflation.” Short-term inflation stickiness is seen as driven by temporary factors such as food prices, while the long-term downward trend remains intact. This approach aims to avoid a premature easing that could reignite inflation, while preserving room for future policy adjustments.
Meanwhile, November survey data show that influenced by flat inflation in October, corporate inflation expectations for the next 12 months remain elevated at 3.4%, while public inflation expectations have climbed to a six-month high of 4.2%. This divergence between official long-term assessments and short-term market concerns has further reinforced the Bank’s decision to wait for clearer confirmation of a sustained decline.
The narrow 5–4 split within the MPC highlights the ongoing clash between “inflation control” and “growth stabilization.” Members favoring a hold are concerned about inflation stickiness reflected in corporate price-setting plans rising to 3.7%. Those advocating a rate cut are increasingly worried about economic weakness: the Bank has revised down its 2026 GDP growth forecast to 1.2%, employment growth is close to zero, and deflationary risks driven by weak demand are beginning to emerge.
There is also market speculation that the Chancellor may introduce income tax increases that would contradict previous campaign pledges. As such, the central bank is leaving room for policy coordination to avoid a direct clash between monetary and fiscal policy.
Taken together, the window for rate cuts is becoming clearer. Governor Andrew Bailey has stated that he “prefers to wait for confirmation of a downward inflation trend,” suggesting that if October–November data meet expectations, a December rate cut could materialize. Chancellor Rachel Reeves has also noted that “inflation is falling faster than expected,” providing supportive signals for monetary easing.
II. Impact on the Housing Market: Combined Tailwinds Create Opportunities for Both Owner-Occupiers and Investors
On the demand side, falling mortgage rates combined with wage growth are easing affordability pressures.
David Hollingworth, Associate Director at L&C Mortgages, noted that although the benchmark rate remains unchanged, banks and lenders, facing intense competition, continue to cut mortgage rates in order to gain market share.
Borrowers on tracker and standard variable-rate mortgages may feel disappointed, having hoped for a faster rate cut and now potentially needing to wait until around Christmas. However, for first-time buyers and home movers planning to enter the market, lenders’ proactive cuts in fixed mortgage rates are already delivering early benefits. Viewing activity for entry-level homes has risen by 12%, signaling a steady recovery in market confidence.
At the same time, wage growth continuing to outpace inflation is strengthening households’ purchasing power. According to the Bank’s survey, the proportion of households planning to buy a home within the next year rose by 2.1 percentage points month-on-month in October 2025. Among them, 42% cited easing cost pressures as the key reason for adjusting their purchase plans, indicating a gradual return of end-user demand.
Price Trends: Core Locations Remain Resilient, High-Quality Assets Take Priority
The current short-term market correction is creating a window for buyers to secure assets at more attractive prices, while the long-term recovery trend is becoming increasingly evident. Several authoritative institutions forecast that UK house prices will continue to rise in 2026, with annual growth potentially reaching 2.3%, and certain prime locations exceeding 4%. Recent data show that by October 2025, prices in core areas had largely stabilized, with month-on-month declines narrowing to just 0.1%, and some popular submarkets already showing early signs of recovery.
Rental Market: Rent Pressures Persist, Making Homeownership More Cost-Effective
Official data from the Office for National Statistics (ONS) show that average rents in the UK have risen by 8.4%. Although the pace of increase has moderated compared with the previous month, rental levels remain elevated. Under the current interest rate environment, many landlords facing higher mortgage payments are passing these costs on to tenants through rent increases. As a result, renters are contending with rising housing costs alongside higher utility bills and food expenses.
The contrast between high rents and declining mortgage rates is making homeownership increasingly more cost-effective than renting. For end-users, entering the market now not only allows them to lock in relatively low fixed mortgage rates, but also helps them escape the ongoing pressure of rising rents. Over the long term, homeowners also stand to benefit from potential capital appreciation, which is encouraging a growing number of renters to transition into buyers.
III. Key Variables Ahead: The Combined Impact of a Potential December Rate Cut and the Autumn Budget
The future direction of the housing market will hinge on the interaction between two critical variables, making December a decisive policy window.
Probability of a December Rate Cut: This will largely depend on whether November inflation shows a meaningful decline. With October inflation still at 3.8%, a drop below 3.6% in November would confirm that the peak has passed, potentially raising the probability of a December rate cut to over 70%. If inflation remains at 3.8% or only marginally lower, a rate cut may be deferred to February 2026. Once implemented, mortgage rates could fall by 0.2–0.3 percentage points, significantly easing borrowing costs, unlocking pent-up end-user demand, and gradually lifting transaction volumes.
Policy Strength of the Autumn Budget: If the Chancellor adopts only moderate tax increases and introduces supportive measures for end-users, such as housing subsidies or stamp duty optimization, these could work in tandem with rate cuts to stabilize market expectations. However, if tax hikes exceed expectations or new property-related taxes are introduced, they could offset the benefits of lower interest rates and delay the pace of market recovery.
In a climate where the direction of interest rates remains uncertain and lending policies are subject to frequent changes, reliable mortgage support services play a crucial role in helping buyers and investors navigate market volatility.
With deep experience in UK property financing, we offer tailored solutions to address today’s market challenges. Whether you are an end-user concerned about the optimal timing to lock in mortgage rates ahead of a potential December cut, or an overseas investor facing cross-border eligibility reviews and sudden policy shifts by lenders, our full-process concierge-style service is designed to support you at every step.
lansha Today’s Summary
From a macroeconomic perspective, although the Bank of England has raised its 2025 GDP growth forecast to 1.5%, the slowdown expected in 2026 to 1.2%, weak exports to the U.S., and subdued corporate confidence will continue to constrain the pace of housing market recovery. Overall, the market is in a transitional phase of “short-term pressure and long-term accumulation.” The policy combination unveiled in December will be the key factor shaping the next phase of recovery, making the current period of caution a critical window for identifying high-quality assets.
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