Chancellor Rachel Reeves says mortgage costs have been reduced for 'hard-pressed families' but pressure mounts
The latest UK labour market figures suggest that further interest rate cuts may be delayed, a development likely to affect mortgage rates for borrowers.
Data from the Office for National Statistics (ONS) showed that the number of payrolled employees dropped by 149,000 (0.5%) between June 2024 and June 2025, with a decrease of 26,000 (0.1%) between May and June 2025. Early estimates for July 2025 indicate a continued decline, with the total number of payrolled employees at 30.3 million.
The employment rate for people aged 16 to 64 rose to 75.3% in April to June 2025, but the unemployment rate also increased to 4.7%. The economic inactivity rate fell to 21.0%. Meanwhile, the number of job vacancies dropped for the 37th consecutive period, falling by 44,000 (5.8%) to 718,000 in the three months to July 2025. The ONS reported that many employers are holding off on hiring or replacing staff, particularly in hospitality and retail.
The latest ONS figures also showed a slowdown in annual wage growth, with regular pay (excluding bonuses) rising by 5% and total pay (including bonuses) up by 4.6% in April to June 2025. After adjusting for inflation, real wage growth was 0.9% for regular pay and 0.5% for total pay using the Consumer Prices Index including owner occupiers’ housing costs (CPIH). Using the Consumer Prices Index (CPI), real annual growth was 1.5% for regular pay and 1.1% for total pay.
Chancellor Rachel Reeves, speaking in Belfast, said the government had restored stability to the economy but acknowledged that further progress was needed.
“There is more to do, but in the first year, we’ve managed to return stability to the economy, we’re growing the economy and reducing costs, particularly mortgage costs for hard-pressed families,” Reeves said.
Economists say the combination of slower wage growth and persistent weakness in the jobs market could prompt the Bank of England to pause before making further cuts to the base rate. Any delay in rate reductions would likely keep mortgage rates higher for longer, affecting homeowners and prospective buyers.
We’ve published the latest labour market figures.
— Office for National Statistics (ONS) (@ONS) August 12, 2025
Commenting on today’s figures, ONS Director of Economic Statistics Liz McKeown said: (quote 1 of 2)💬
Read the latest Labour market overview ➡️ https://t.co/ChjjxjRCiA pic.twitter.com/yKrxqKFFvO
For Isaac Stell, investment manager at Wealth Club, the UK’s latest labour market data points to growing signs of economic strain and an absence of momentum.
“Although the employment rate saw a slight increase in June, this comes against a backdrop of weakening economic activity and falling demand,” he noted. “One of the clearest indicators of this slowdown is the continued decline in job vacancies.
“Both the Chancellor and the Bank of England will have their eyes firmly fixated on wage growth which slowed to 4.6%. This deceleration signals weakening employer confidence and reduced capacity to offer competitive compensation. This will of course raise concerns about household spending power and with it broader economic resilience. With tax rises in autumn looming, the data is unlikely to regain momentum from here.”
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