Bank of England Governor Andrew Bailey has stated that interest rate cuts remain “off the table”, dampening expectations within the property sector for near-term relief on borrowing costs.
The announcement comes as the property industry had anticipated potential base rate reductions in the coming months to stimulate transaction activity amid ongoing political uncertainty.
Political and economic headwinds
The property market continues to face challenges from geopolitical tensions in the Middle East, whilst speculation over a potential change in leadership at Number 10 has introduced additional uncertainty. Reports suggest that Andy Burnham, considered a likely successor as Prime Minister, may introduce changes to property taxation, creating further nervousness among market participants.
“There was an expectation that we would cut rates this year. That was off the table in March, and it’s off the table at the moment,” Bailey said. He confirmed, however, that he had not supported an interest rate increase this year.
Current rate position
The Bank of England’s Monetary Policy Committee voted 7-2 to hold interest rates at 3.75% for the fourth consecutive time last month. The decision was widely anticipated given inflation remains above the Bank’s 2% target.
Inflation currently stands at 2.8%, lower than previous months, which has eased pressure on the MPC to consider a rate rise. The decision to maintain rates has implications for landlords adjusting to regulatory changes, whilst tax threshold changes are set to affect the majority of landlords by 2028.
Outlook
The MPC is scheduled to meet at the end of this month and again in September. Market analysts now consider the prospect of a rate cut at either meeting highly unlikely, suggesting that property market participants will need to adjust strategies accordingly in the absence of monetary policy support.