Newspage MPC rate decision preview

Cut (0.5%)
There can be no doubt that the property market would benefit from a cut in interest rates. The market, certainly in the mid to higher price points, could do with some stimulation as prices continue to soften and supply outstrips demand. That being said even at the lower levels of the market, first time buyers who are often considered the starter motor of the marketplace should also be encouraged to get on the ladder and a rate cut would certainly assist in that regard, and with a little luck that might improve movement further up the ladder.
Of course anything that gets the market moving will help the wider economy too, as not only do transactions help generate SDLT receipts, but so much activity flows from the sale and purchasing of property, from solicitors, to removals, tradesmen to interior designers as well as manufacturers and suppliers.
Let us hope the MPC consider these wider impacts rather than just controlling inflation.

Cut 0.25%. On the front lines, the mood is grinding inertia and trepidation, a repeat of 2024, with government floating ideas like stamp duty reform only to retreat once they meet opposition. Clients are holding their breath. Spending isn't dead, but every purchase, investment and contract renewal takes longer and faces tighter scrutiny. Cash has always been king, now it's survival. Businesses are exhausted by the squeeze of tax and minimum wage rises, mounting regulation and cumulative inflation. For SMEs, borrowing costs mean the risk of debt outweighs the potential returns. Job-creating projects sit in backlogs, waiting for a signal that borrowing is becoming affordable again. What businesses need isn't just cheaper credit, it's a psychological shift. A quarter-point cut signals the squeeze is lifting. A small cut won't spark reckless spending or reignite inflation, but break the stalemate, ease cash-flow pressure through supply chains, and restore momentum to local markets.

Cut (0.25%)
Watch a small firm run payroll and the pressure shows in one place. The person who left was never replaced, and the owner covers it. Cheaper borrowing will not make a new job affordable. It will make a business willing to try.

Small firms run on overdrafts and stock finance, where the rate can move, and those follow Bank Rate first. But on a £50,000 overdraft, a quarter point off 3.75 per cent is about £125 a year. Nobody hires on that. What owners are waiting for is the direction to change.

Most of my clients sell online, and they are ordering Christmas stock right now, paying in August for money that will not arrive until December. If they order cautiously now and they will run out of stock in the most profitable period.

There is a fair case for holding, but certainly not increasing.Services inflation was 3.6 per cent in June. But the headline rate fell to 2.6 per cent, and the caution I see is not the sort that reignites prices. Cut while it still changes a decision.

Hold
For business owners, the challenge isn't just the cost of borrowing or running a business - it's uncertainty. Investment decisions, recruitment and expansion plans are all being delayed by some because confidence remains fragile. A rate cut may provide a short-term sentiment boost, but with inflationary pressure still present, stability is arguably more valuable than a premature move. Businesses need confidence that rates are moving in a sustainable direction, not a series of reversals. A period of stability gives firms greater certainty to plan, invest and make long-term decisions.

Hold. The economy feels flat rather than fragile. Clients are cautious, not capitulating, and business owners are managing costs and delaying investment rather than panicking. A rate cut would provide a short-term sentiment boost, but the Bank should base its decision on the underlying inflation outlook, not simply the desire to boost confidence. With services inflation still sticky, holding rates is the prudent course. What the economy needs most is stability and predictability. I don't see a case for higher rates this year either. Unless inflationary pressures broaden materially, the Bank should resist tightening further.

A year ago, I’d have said cut. Today, I’m leaning hold. For SMEs, the real issue isn’t borrowing costs, it’s confidence. Business owners are dealing with higher employment costs, regulatory uncertainty, cautious customers, and tighter cash flow. A small rate cut may make headlines, but it won’t change hiring or investment decisions. What businesses need is stability they can plan around. Holding rates steady as inflation eases signals consistency, not reaction. The economy isn’t in crisis, but it is stuck. In that environment, certainty matters more than symbolism. When confidence returns, lower rates will start to matter.

A cut of 0.25%
The housing market needs some confidence back before it starts moving again. Right now both existing mortgage borrowers and first-time buyers are hesitant to push ahead with their plans, and the wider geopolitical uncertainty isn't helping.
It's not just about home owners, who will benefit a great deal. A lot of the funding that trading businesses rely on is priced against the Bank of England base rate, so a cut takes real pressure off them, and that matters when almost every other cost they face is only heading one way

Hold - we don’t want to go back to a boom and bust economy, whilst a rate cut would be useful, it’s the kind of decision that will be reversed a few months later. The rate is somewhat irrelevant in recent months, more emphasis has been played on the comments and notes from the MPc, as that gives more guidance to the future rate movement, directly influencing the rates for clients today. Be positive about the future and we’ll feel the benefit in business and in our pockets.