A 0.25% interest rate cut — what it could mean for homeowners in 2026
The Bank of England has cut the base rate by 0.25% to 3.75% at its final meeting of 2025, marking the fourth cut this year. The move reflects easing inflation and may bring improved mortgage options for borrowers as 2026 approaches.
The Bank of England held its regular meeting today to discuss interest rates, the last scheduled decision of 2025. The Monetary Policy Committee has decided to cut the base interest rate by 0.25%, taking it down to 3.75%, a move that was widely anticipated by financial markets and economists after recent inflation data. Investing.com UK
This outcome aligns with predictions over the past few days, as inflation has continued to ease and unemployment has risen, creating a backdrop whereby tighter monetary policy is less necessary. Bank of England
This rate drop marks the fourth reduction this year, with many of them occurring in the second half of 2025. With the trend now pointing downward, experts are asking whether this trajectory is a positive signal for the UK economy in 2026.
Our mortgage protection adviser Nicola Henton sheds light on what this may mean for your mortgage journey:
“A cut to 3.75% is welcome news for many homeowners and prospective buyers. Lower base rates usually filter through to more competitive mortgage pricing over time, reducing monthly costs for those on variable and tracker deals.
“While every lender’s response varies, this easing gives borrowers greater breathing room and confidence as we head into 2026.”
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