Yorkshire Housing is urging the Bank of England to move away from its cautious stance on interest rates, warning that high borrowing costs are stalling housebuilding, choking economic growth, and undermining the Government’s housing ambitions.
They say the Bank’s position is increasingly out of step with the economic realities facing both the housing sector and the wider UK economy. This follows the Bank’s latest decision to hold rates at 4% on 6 November. Latest GDP figures also show UK growth has slowed more than expected, with an increase of just 0.1% between July and September – far below what’s needed for a sustainable recovery.
The call comes alongside the publication of a new report from Yorkshire Housing, which highlights how persistently high interest rates are holding back the housing sector, which is a key driver of economic growth.
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It also argues that while the Government’s £39 billion housing package, announced in June, was warmly welcomed, its potential impact is being severely undermined by the Bank’s position – with high borrowing costs making it harder for housing schemes to stack up financially, leaving many projects paused or shelved altogether.
The social housing sector is carrying over £100 billion in debt*, including £18 billion in short-term variable loans. Even a modest cut in interest rates could unlock substantial investment capacity:
- 0.25% cut = around £45 million saved each year
- 0.5% cut = £90 million released
- 1% cut = £180 million freed up annually – enough to fund thousands of new homes or major regeneration projects
Nick Atkin, CEO of Yorkshire Housing, said: “The Bank’s decision to hold rates may have felt safe a week ago, but this holding pattern is now doing more harm than good.
“Every time that rates remain high means fewer homes built, fewer jobs created, and less investment in our communities. At a time when we’re seeing sluggish growth in the face of a national housing crisis, we simply can’t afford to keep pressing pause on our sector that underpins so much of our economy.
“It’s time to move away from this overly cautious approach. The Bank’s next decision in December is a critical moment – it must act decisively to support growth, restore confidence, and unlock the housing delivery this country urgently needs.”
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Backed by the G15 and the Northern Housing Consortium, Yorkshire Housing’s report shows high borrowing costs are stalling development, straining budgets, and threatening long-term investment in new homes.
Ian McDermott, Peabody CEO and Chair of the G15, said: “As not-for-profit social landlords, we borrow for the long-term to pay for building and maintaining affordable homes. Faster and more decisive interest rate cuts would create substantial headroom for London’s largest providers, freeing up tens of millions of pounds and additional capacity to invest in new and existing homes and to help people in housing need.
“Action on rates would support housebuilding in the capital, driving economic growth for the country and boosting national productivity through maintenance and construction activity.”
Patrick Murray, Executive Director at the Northern Housing Consortium, added:
“We are hearing from a growing number of our members that higher interest rates are slowing down development, squeezing budgets and making it harder for them to invest in new and existing homes.
“Lower borrowing costs would enable social landlords to improve existing stock and help deliver the affordable homes communities urgently need. This report clearly outlines both the scale of the challenge and the kind of action that could help to unlock delivery on the Government’s house building targets, at pace.”
