The decision by the Bank of England’s Monetary Policy Committee to keep interest rates on hold at 5% has left markets looking towards the end of the year for a boost to the economy.

The MPC voted 8-1 to keep rates on hold, down from 7-2 in August.

The MPC minutes say: “Since the MPC’s previous meeting, global activity growth has continued at a steady pace, although some data outturns suggest greater uncertainty around the near-term outlook.

“Oil prices have fallen back, reflecting in large part weaker demand.”

The committee adds that it expects UK economic growth of 0.3% in the third quarter of this year, “marginally weaker” than the 0.4% rate forecast in its August report, but adds this is “broadly in line with estimates”.

On mortgages, the body says: “The share of two-year fixed-rate mortgages within new secured household lending had been increasing since the first quarter of 2023, despite rates on these mortgages being above five-year fixed rates over this period.

“That had reversed the previous trend whereby longer-duration mortgage fixes had increased in popularity since 2016, probably reflecting household expectations of lower interest rates.

“Slow mortgage stock turnover meant that the share of five-year fixed-rate mortgages in outstanding lending had remained historically high.”

The decision by the MPC comes after UK gross domestic product flatlined in July, when economists had expected 0.2% of growth.

And as Sterling surged against the dollar since inflation held at 2.2% in August, according to Office for National Statistics data shows on Monday. Today, one pound buys $1.3312, up 0.83%.

Despite the Bank’s hold today, central banks in the West have begun easing rates to stimulate economies as inflation eases.

Yesterday, the US Federal Reserve lowered interest rates for the first time since July 2023 with a bigger than usual cut of 0.5 percentage points, to a range of 4.75%-5%.

Fed chair Jerome Powell, said the “strong” move was needed as job market concerns grow even as price rises ease.

In June, the European Central Bank cut interest rates for the first time since September 2019 by 0.25% to 3.75% — beating the Bank of England and the US Federal Reserve to ease borrowing costs in its region. Markets are pricing in an ECB rate cut next month.

SPF Private Clients Mark Harris says: “There is a strong argument for the Bank of England to get on and cut rates again, giving borrowers an affordability boost, easing pressure on household finances and in doing so, assisting the wider economy.

“If worries about the Budget [by Chancellor Rachel Reeves on 30 October] are realised, the need to boost transactions and activity in the housing market will be all the more apparent.

“However, while the BoE has failed to take action, lenders are reducing their mortgage rates regardless as they compete for business.

“Mortgage rates continue to soften, with Santander introducing a sub-4% two-year fix on the back of the lowest two-year swap rates in two years.”

Rightmove mortgage expert Matt Smith adds: “We’re still expecting two rate cuts before the end of the year, and home-movers should continue to see a downward trend in mortgage rates this side of Christmas.

“I think overall, there’s likely to be quite a moderate response from lenders in response to today’s news – and while rates should continue to come down, mortgage lenders’ funding costs are unlikely to come down significantly, which wouldn’t leave heaps of room for dramatic mortgage rate cuts.”

Legal & General Mortgage Services managing director Kevin Roberts says: “Today’s base rate decision is a continuation of the thoughtful approach we have seen from the Bank of England this year.

“However, the mortgage market remains primed for a strong final quarter. We are seeing the return of sub-4% mortgage products for the first time since April, and supply is increasing, with the average number of available homes per estate agent at its highest since 2014.”

Deutsche Bank chief UK economist Sanjay Raja adds: “We maintain our call for one more rate cut this year. We see Bank rate falling to 4.75% by year end.

“Thereafter, we continue to see four quarter point rate cuts through 2025, followed by a further three more rate cuts in 2026, taking Bank rate to 3%.”

Hargreaves Lansdown head of personal finance Sarah Coles points out: “The hold on rates isn’t the most significant thing driving sentiment right now, so is unlikely to move the market.

“Buyers are benefiting from wages outstripping inflation – making them feel wealthier. Meanwhile, mortgage rates have been falling, making properties feel more affordable.

“The longer this continues, the more positive sentiment is likely to be, and the better the chances of a lively property market as we go through the rest of the year.”

Despite, today’s hold from the MPC, money markets are fully pricing in a cut by the Bank’s November meeting, and a second cut in December.

That would bring Bank rate down to 4.5% at the end of the year, from 5% today.

MPC Vote:

Eight members — Andrew Bailey, Sarah Breeden, Megan Greene, Clare Lombardelli, Catherine L Mann, Huw Pill, Dave Ramsden and Alan Taylor — voted in favour to hold rates.

Swati Dhingra voted to cut Bank rate by 0.25% to 4.75%.