Today (Thursday 18 December 2025) the Bank of England announced a cut to the UK Base Rate, reducing it from 4.00% to 3.75%, the sixth reduction since mid-2024 and the lowest level in almost three years.
This move comes as inflation continues to slow and economic growth softens, with the Office for National Statistics reporting that inflation fell in November to 3.2%- below the Bank’s own forecast.
Why the Bank Cut Rates
The Bank of England’s Monetary Policy Committee (MPC) voted 5–4 in favour of the quarter-point cut as signs of economic weakness grow:
- Inflation is easing more than expected, giving the Bank room to reduce rates.
- Official data show the UK economy barely growing and unemployment rising, signalling softer demand.
- Policymakers hope that reducing borrowing costs will support confidence and encourage spending ahead of 2026.
Despite the cut, inflation remains above the Bank’s 2% target, and several MPC members were cautious, highlighting that future rate decisions will be finely balanced.
What This Means for Homeowners & Buyers
Mortgage Holders
If you’re on a tracker or variable-rate mortgage, you’re likely to see monthly payments fall as lenders adjust to the new base rate. That’s welcome news for many households as we head into 2026.
However:
- Fixed-rate mortgages won’t change until renewal and any benefit depends on the deal you choose at that time.
- With rates still higher than pre-pandemic levels, it’s important to compare products carefully before remortgaging.
Borrowers & Buyers
Lower borrowing costs can help first-time buyers and those looking to move:
- Cheaper loans make buying more affordable.
- Increased confidence may stimulate more activity in the housing market.
But buyers should remain mindful of broader economic uncertainties.
Savers
Unfortunately, this rate cut also means banks and building societies are likely to reduce savings rates — a blow to those relying on interest income.
The Bigger Picture
This cut is part of a broader trend over the past year as the Bank balances manageable inflation against a sluggish economy. Markets are now watching closely to see if further cuts will follow in 2026.
For the property market, the takeaway is simple:
Lower interest rates = cheaper borrowing = more potential movement in the housing market.
At Hattons Estate Agents, we’ll be watching how lenders respond, and how this influences buyer confidence and pricing trends in the months ahead.
Final Thoughts
Whether you’re a homeowner, selling, buying or remortgaging — today’s base rate cut is good news for borrowing costs, and could help stimulate activity as we move into the new year.
If you’d like personalised insight into how this might affect your mortgage or property plans, get in touch with the team at Hattons — we’re here to help you make the most informed decision.