Bank of England Cuts Base Rate to 3.75% - What It Means for Mortgage Borrowers
On 18 December 2025, the Bank of England (BoE) delivered a 0.25% cut to the official base rate, reducing it from 4.00% to 3.75%. This move marks the first reduction since November and aims to provide some support to a slowing UK economy amid easing inflation.
What Has Changed?
Bank Rate is now 3.75%
The Bank’s Monetary Policy Committee (MPC) voted, by a narrow majority, to lower the base rate by a quarter percentage point in response to slowing inflation and softer economic data.
This reduction is part of a broader trend of rate cuts seen through 2025 as price growth continues to ease and policymakers look to support growth.
What This Means for Mortgage Borrowers
Tracker & Variable-Rate Mortgages
- If you’re on a tracker mortgage or a standard variable rate (SVR), this cut should feed through into lower monthly repayments-albeit not immediately.
- Lenders typically adjust their variable products to reflect changes in the base rate, so you may see your monthly payment fall over the coming weeks as lenders update pricing.
Fixed-Rate Mortgages
- For many borrowers on fixed-rate mortgages, your current deal won’t change until it ends.
- However, new fixed rates are likely to soften, especially on shorter-term products, as competition increases and markets price in the lower Bank Rate. Brokers are already seeing some fixed rates drop nearer to pre-pandemic levels as lenders compete.
Remortgagors & Those Coming Off Deals
- If your fixed deal is expiring soon, this cut could mean more attractive remortgage options - but acting early remains key.
- It’s worth starting your remortgage search three to six months before your deal ends to capture improving pricing.
- A lower base rate doesn’t guarantee the lowest deal forever, but markets have responded positively and lenders are reacting.
What This Means for the Wider Market
Housing Activity
- Lower borrowing costs can help stimulate housing demand, particularly for first-time buyers and homeowners looking to move or remortgage.
- Industry commentators are already noting a price-war environment among lenders, which could push two- and five-year fixed rates lower in the weeks ahead.
Savers & Other Borrowers
- If you’re saving money, this cut could see interest rates on savings accounts drift down, as banks and building societies adjust rates across the board.
- Credit card and unsecured loan rates may also fall, but usually with a lag after base-rate changes.
Should You Do Anything Now?
Here are a few practical points to consider:
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Review your mortgage deal if it’s nearing expiry - use this cut to compare options now rather than waiting.
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Contact a broker if you’re on a tracker/SVR to understand when your lender updates your rate.
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Don’t delay if you’re planning a purchase - softer pricing could mean better borrowing costs this side of Christmas and into 2026.
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Keep an eye on markets - further base-rate moves aren’t ruled out next year, depending on inflation and economic data.
Final Thoughts
The BoE’s move to
3.75% is good news for borrowers - particularly those already on variable products or nearing a remortgage. But while cheaper borrowing costs are welcome, the broader economic backdrop remains cautious, and
lenders will continue to price risk into mortgage deals. Staying informed and proactive will help you make the most of this easing cycle.
