The Bank of England cut interest rates today, providing some relief for borrowers ahead of Christmas.

The decision to bring the the cost of borrowing down to its lowest level in nearly three years was announced at midday by the Bank of England’s Monetary Policy Committee.

The Bank has reduced the base rate from 4% to 3.75%, which is good news for people looking to borrow cash or secure a mortgage deal. But while a cut was widely expected today, policymakers did not vote unanimously, with four of the nine-person monetary policy committee voting to hold interest rates at 4%.

The Bank said that, following the tax and spending measures announced in last month’s Budget and easing oil and gas prices, it now expects inflation to fall closer to its 2% target in the spring or summer of next year.

Previously, the Bank had not expected inflation to return to that level until 2027.

Industry response:

Paul Hardy, managing director at LSL Estate Agency Franchising: “Today’s cut to 3.75% is a welcome boost after the slowdown leading up to the Budget. Dropping below 4% is psychologically significant for buyers and sellers, restoring confidence after a cautious few months. While it won’t transform conditions overnight, it signals improving stability, and we expect lenders to respond with sharper products, setting the stage for renewed market activity heading into 2026.”

Simon Capp, head of residential sales at British Land: “Today’s rate cut is a positive end to the year for the residential market, which has faced headwinds throughout 2025 due to heavy Budget speculation and slower than expected reduction in rates. The timing of this cut is helpful, as January is typically a busy period driven by ‘new year resolution’ activity, with many buyers looking to progress a purchase or sale, so the move to 3.75% should lift buyer sentiment and support mortgage affordability as we head into the new year.”

Lucian Cook, head of residential research at Savills: “Today’s cut to the Bank of England base rate will open up additional headroom in the housing market, helping to rebuild momentum after a stop-start year. However, it does feel as if this long-awaited rate cut is already “baked-in” to fixed-term rates, and an underlying sense of caution among buyers will override any potential stimulus to house prices in the short term.

“Looking ahead to 2026, we expect house price growth to remain in low single-digit territory, despite improving affordability. While interest rates are expected to continue to edge down, weak economic growth is likely to act as a drag on buyer confidence, with a weak labour market limiting the capacity for growth.

“Our mainstream house price forecast expects average house prices to increase by 2% in 2026 or £7,200, in what is expected to be a bottom-up rather than a top-down recovery.

“Typically, the prime market leads a rebound, but the opposite is true in the current environment as it will take some time for the top-end of the market to fully absorb tax changes, with moderate falls expected to continue in the New Year.”

Simon Gammon, managing partner, Knight Frank Finance: “Lenders have been trimming mortgage rates for several weeks, but today’s decision adds momentum to what we expect to be a highly competitive January. With new lending targets in place, lenders are likely to undercut one another in a bid to win early-year business. It’s not impossible that we see two-year fixed rates below 3% by spring.”

Matthew Thompson, head of sales at Chestertons: “Many house hunters use December to review their finances, so a rate cut is well-timed. Alongside easing mortgage rates, it should help underpin buyer confidence and support activity as the market moves into 2026.”

Matt Smith, Rightmove’s mortgages commentator: “The financial markets and mortgage lenders have been expecting today’s Bank Rate cut for a while, and therefore responded early with mortgage rate cuts in December to round off the year. Bank Rate cut headlines are always positive for home-mover sentiment, even if this one has already been baked into mortgage rate cuts and won’t drive further drops. However, what will have more of an impact on the future direction of mortgage rates is the better than expected inflation figure reported earlier this week, which has improved the market’s forecast for next year.

“Don’t expect any big rate drops before Christmas while the property market is quieter, but it does mean we could now see a fresh round of rate cuts in the new year as lenders look to start the new year with a bang. Home-movers are likely to see the most notable rate drops for two-year fixed products rather than five, and next year we expect the gap between two-year and five-year deals to grow.”

Nathan Emerson, CEO of Propertymark: “As we round the year off, it is extremely positive to see the Bank of England in a position where it has the confidence to make what is now a fourth base rate cut within twelve months.

“Although mortgage agreements vary, today’s news could typically represent a saving of around £150 each month for those currently on a tracker mortgage, or for those considering a new mortgage deal, when compared to the start of 2025.

“This, coupled with the fact that we have also witnessed the rate of inflation dip further only yesterday, should help create a strong platform for consumer confidence and affordability as we progress into the new year. In addition, there is real potential for lenders to support first-time buyers with more focused products to help uplift the market over the coming weeks and months.”

Iain McKenzie, CEO of The Guild of Property Professionals: “Today’s Bank Rate cut to 3.75% is a timely confidence boost for the housing market. With headline inflation easing to 3.2%, below expectations, this move brings borrowing costs to their lowest level in nearly three years and sends a clear signal that conditions are stabilising. For buyers and movers eyeing the New Year, it feels like an early Christmas present. We expect sentiment to continue to improve, supporting activity through the spring 2026 selling season, particularly as the Budget landed lighter than many feared.”

Jason Tebb, president of OnTheMarket: “As expected, the Bank of England cut interest rates to 3.75 per cent. With inflation falling to 3.2 per cent in the year to November, this gave the rate setters the impetus they needed to cut rates for the sixth time in 17 months.

“This news will be welcomed by borrowers, particularly those due to remortgage in the coming year, who will be hoping that the rate shock will not quite be as exaggerated as it otherwise might have been. Previous rate reductions have been hugely welcomed by buyers and sellers alike, boosting confidence, easing affordability and giving much-needed impetus to the market, particularly since the stamp duty concession ended and the Budget did not offer anything to replace it.

“With the Budget now out of the way, the atmosphere of uncertainty has lifted and this rate cut delivers a real pre-Christmas boost for the housing market which bodes well for activity in the new year.”