Bank of England split as three policymakers push for rate hike

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Bank of England split as three policymakers push for rate hike

In a divided vote, the Bank of England has held interest rates at 3.75%.

The Monetary Policy Committee (MPC) narrowly voted 6-3 to keep the Bank Rate unchanged.

Three members voted to increase the Bank Rate by 0.25 percentage points, to 4%.

Energy prices have remained volatile

The MPC said of its decision: “In response to events in the Middle East, crude and refined energy prices have remained volatile and higher than pre-conflict. The impact of the energy shock on the UK economy remains uncertain.

“CPI inflation has fallen to 2.6% since the previous meeting, although it is expected to rise later this year as the effects of higher energy prices continue to pass through. The risk of material second-round effects in price and wage-setting, against which policy needs to lean, is greater the longer higher energy prices persist.

“There is little evidence so far to suggest such effects, and there have continued to be clear signs of underlying disinflation in recent data.”

Industry reaction

Samuel Fuller, director at Financial Markets Online, said: “The Bank of England’s hawks are doubling down. Three members of the Committee voted for an immediate increase in interest rates, one more than did so in June.

“Their militancy is reflected in the Committee’s minutes, which talk tough about the Bank’s willingness to act decisively to cool inflation.

“While CPI has come in under expectation for three months in a row, and sank back to a 15-month low in June, the Bank is on alert in case the energy shock drives secondary inflation.

“In recent weeks, markets had begun to predict that the Bank would be content to leave interest rates unchanged for the rest of the year.

“That bet may now change as the Bank’s minutes suggest it has refined its stance from ‘watch and wait’ to ‘watch and wait with a big stick’.

“While this means no immediate change for savers, we’re likely to see mortgage interest rates tick back up in coming weeks. With America’s on-off war with Iran now into its sixth month, continued volatility and lingering inflationary pressure have tipped the Bank into more hawkish territory and UK equities and mortgage borrowers could be the biggest losers.”

Nathan Emerson, CEO at Propertymark, said: “By holding interest rates, the Bank of England has opted for a measured approach as inflation remains above its 2 per cent target. While price pressures have eased in recent months, today’s decision reflects the need to ensure inflation continues moving in the right direction before further policy changes are considered.

“A stable base rate provides greater certainty for the housing market. It gives lenders more confidence to continue offering competitive mortgage products while allowing buyers to make informed financial decisions. Savers also continue to benefit from relatively attractive returns on savings, helping some prospective homeowners build towards a deposit.

“However, inflationary pressures have not disappeared. Higher household costs, including July’s increase in the energy price cap, alongside ongoing uncertainty in global energy markets, mean the Bank of England is likely to continue taking a cautious, data-led approach over the coming months.”

Hina Bhudia, Partner, Knight Frank Finance, said: “The MPC has turned a little more hawkish since the previous meeting, with three members voting to raise the base rate, which is unsurprising given the escalation of hostilities in the Middle East. Mortgage lenders have already repriced higher to account for this, so borrowers should enjoy some stability in the short term.

“That said, the outlook for mortgage rates over the coming months remains highly uncertain. Much will depend on developments in the Middle East and whether higher energy prices feed through into broader inflation at a time when demand across the economy remains relatively subdued. Many lenders are behind their targets for the year and will pass on to borrowers any reduction in funding costs as soon as they can.”

Colleen Babcock, property expert at Rightmove said: “There’s stability for now as the Bank of England holds its Base Rate as widely expected. We’ve seen average mortgage rates increase over the last few weeks as geopolitical tensions have escalated, and the average two-year fixed rate is currently coming it at 5.11%.

“For broader context, this is up from 4.25% before the war in Iran started, but down from around 5.43% at the peak of tensions in April. For home-movers, rates remain elevated which continues to stretch affordability. However, while rates are high, they’re also relatively steady, which helps movers to plan and make decisions.

“Even relatively small changes in mortgage rates can have a noticeable impact on monthly repayments, particularly for first-time buyers, so any downwards movement in rates during the second half of this year would be very welcome.”

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Government admits no assessment of burden facing landlords

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Government admits no assessment of burden facing landlords

The government has confirmed it carried out no assessment of the combined impact of landlord tax hikes and Renters’ Rights Act reforms.

In a written parliamentary answer, Baroness Taylor of Stevenage said the government had made “no single assessment” of the cumulative costs landlords will face from the Renters’ Rights Act alongside planned tax changes.

No single assessment

In a written parliamentary question, Lord Truscott asked: “What assessment the government have made of the combined cost of new regulatory measures under the Renters’ Rights Act in addition to proposed tax increases for the average landlord”.

Baroness Taylor of Stevenage said: “My department has made no single assessment covering the combined cost of the measures in the Renters’ Rights Act and proposed tax increases.

“Last year’s Budget, the government announced a 2ppt increase to the rate of property income to be introduced from April 2027. This is to help narrow the gap between taxes paid on work and paid on income from assets. An assessment of this policy was published in a Tax Information and Impact Note.”

In the impact notice, it claims the 2ppt increase would be “negligible”.

It said: “By 2029 to 2030, 2.4 million landlords (6% of taxpayers in 2029 to 2030) will face an increase in tax as a result of this measure. Administratively, this measure will affect individuals (including partners in partnerships) with profits from property rental income. It is anticipated that both the one-off and ongoing administrative burdens for these individuals will be negligible.”

Hit renters and landlords

However, industry figures have previously warned that the combined impact of rising taxation and increased regulation could push more landlords to exit the private rented sector.

Jonathan Stinton, head of mortgage relations at Coventry Building Society, said: “Hiking property income tax won’t just hit landlords, it will hit renters in the pocket too. When the cost of being a landlord rises, those pressures almost always find their way into monthly rents, meaning those who don’t own a home pay the price.

“A similar rise to tax on dividends means the cost will also go up for landlords who hold their property in a limited company.

“The more landlords are taxed the less appealing it is to let a property, which could lead to fewer landlords and reduced choice for landlords. The simple but powerful forces of supply and demand would then push rents higher, making it much more difficult to rent a home. First-time buyers who are trying to save a deposit while renting could especially struggle and worry that their homeownership dreams are pushed even further out of sight.”

Sam Humphreys, head of M&A at Dwelly, said: “The rise in property income and dividends tax presents all types of landlords with yet another obstacle to adapt to at a time when they are already absorbing significant operational changes under the Renter’s Rights Act.”

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Final warning for landlords as possession deadline looms

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Final warning for landlords as possession deadline looms

Landlords only have until tomorrow (31 July) to apply for court possession under Section 21 or older Section 8 notices.

When the Renters’ Rights Act came into force in May, fixed-term tenancies were abolished, and all existing Assured Shorthold Tenancies (ASTs) automatically became Assured Periodic Tenancies (APTs).

However, landlords already in the possession process could still rely on valid Section 21 or Section 8 notices served before 1 May, provided they applied to court by 31 July.

Industry bodies have urged landlords to act now, with one expert warning capacity pressures are “unlike anything seen” as landlords rush to meet the deadline.

Hard deadline with very real consequences

Paul Shamplina, founder of Landlord Action, told Property118: “The final 31 July deadline is now upon us and, for landlords whose existing notice remains valid until that date, it is a hard deadline with very real consequences.

“I have been on the phone constantly, and the capacity pressures and volume of work we are experiencing are unlike anything I have seen since starting Landlord Action.

“We have been warning landlords about this date for months, but the last-minute panic is very apparent. It is not enough simply to have served a notice or contacted a solicitor. The possession claim must be started in time, and before that can happen we need to review the paperwork and regulatory documents to ensure everything is compliant.

“Where landlords have prepared notices themselves, we frequently find missing documents or other problems that could cause the claim to fail in court.

“The pressure has become so intense that, wherever possible, we are arranging for completed claims to be hand-delivered to the courts so we know they have been received.”

Unintended consequences

Mr Shamplina warns that landlords who have left it too late will lose the opportunity to rely on their existing notice.

He explains: “Those seeking to sell may then have to begin again under the new Section 8 process using Ground 1A, subject to the relevant conditions and notice period.

“One of the unintended consequences is that some landlords who might otherwise have allowed a tenancy to continue have acted now because they feared losing the ability to recover their property.

“That means tenants are being asked to leave earlier than they might have been, which risks adding further pressure to already stretched temporary and social housing services. That is the opposite of the greater security the reforms were intended to provide.”

Industry reaction

A spokesperson for the National Residential Landlords Association (NRLA), warned landlords they will have to start possession proceedings again if they miss the deadline.

The spokesperson told Property118: “As many will already know, Section 21 had an accelerated possession procedure which allowed judges to base their decisions on the paperwork alone, a system that did not require a court date.

“If a landlord issued a valid Section 21 notice before 1 May 2026, they may still apply to the court for a possession order before 31 July 2026, provided it is no more than six months after service of the notice.

“It is crucial to note that if these deadlines are missed, the Section 21 notice will expire and landlords will need to start possession proceedings again under the new regulations.

“We expect these changes to have a significant impact on court wait times, with an already overloaded court system set to experience further delays due to an upsurge in the number of Section 8 court hearings brought before the courts.”

Kim Lidbury, president of ARLA Propertymark (Association of Residential Letting Agents), explains it’s important for letting agents to help landlords with the upcoming deadline.

She said: “The 31 July deadline is an important date for landlords who served a valid Section 21 or relevant Section 8 notice before the Renters’ Rights Act came into force. To rely on the previous possession process, landlords must have submitted their possession claim to the court by this date.

“Missing the deadline could mean landlords are required to pursue possession under the new legislative framework instead, which introduces different grounds, processes and requirements. This could result in additional delays, costs and uncertainty.

“Landlords who are affected should act without delay. Letting agents have a vital role to play in helping landlords understand the transitional arrangements, ensuring the correct documentation has been submitted, and providing professional advice to help clients navigate the new legal framework with confidence.

“As the sector adapts to these significant reforms, professional agents will be key to supporting compliance while helping landlords continue to provide high-quality homes for tenants.”

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