The Bank of England’s Monetary Policy Committee has today voted to reduce the base rate. Here’s what the change could mean for you.
The Bank of England has reduced the base rate from 4% to 3.75%, marking another positive step for borrowers as inflation continues to ease and confidence builds for 2026.
The decision has been supported by improving inflation figures. Headline inflation fell to 3.2% in November, down from 3.6% in October, and is now at its lowest level since March, according to the Office for National Statistics. This encouraging trend has helped pave the way for lower interest rates and improved confidence as we move into the new year.
It was a closely fought decision, with a narrow 5–4 vote in favour of a cut. Notably, Bank of England Governor Andrew Bailey switched his vote in support of the reduction, tipping the balance.
What does the base rate cut mean for your mortgage?
- Fixed-rate mortgage holders: Your monthly payments will remain the same until your current deal ends.
- Tracker mortgage holders: As your rate moves in line with the base rate, your monthly payments should reduce.
- Standard variable rate (SVR) borrowers: Your payments may come down if your lender chooses to pass on the cut.
If you’re unsure which type of mortgage you’re on or how this change affects you, we’re always happy to help.
Is inflation now under control?
The Bank of England has indicated that inflation has passed its peak, leading to this being the sixth interest rate cut over the past 18 months. While it’s believed that rates remain on a gradual downward path, decisions are becoming increasingly finely balanced as rates approach what is considered a more “normal” level.
“The sharp fall in inflation has given the Bank of England room to begin easing monetary policy, with a rate cut aimed at supporting a slowing economy,” says MB Associates’ Sales & Operations Director, Les Pick. “Lower borrowing costs should provide relief to households and businesses facing higher unemployment and weaker wage growth, while also helping stimulate demand.”
The Bank’s long-term inflation target remains 2%, and following recent budget measures and November’s figures, it now expects inflation to move closer to this target by April 2026 – earlier than the previous forecast of 2027.
That said, the UK economy has shown no growth between October and December so far, highlighting stagnation.
What’s in store for the housing market?
There is reason for cautious optimism in the housing market, looking ahead to 2026. Halifax’s latest Housing Market Review shows that 2025 has been one of the most stable years for UK house prices in over a decade. Halifax predicts price rises of between 1% and 3% next year and Zoopla predicts growth of around 2%.
Call MB Associates on 020 8652 5240 for mortgage advice in Surrey (Cheam, Kingston, and Sutton).