The mortgage market has been greeted with some festive cheer from the Bank of England’s widely expected decision to cut interest rates today.
The Bank of England’s Monetary Policy Committee (MPC) voted to cut the Bank Rate by 25 basis points to 3.75%.
After lowering the bank interest rate from 4.25% to 4% at the August Monetary Policy Committee meeting, the bank interest rate remained at 4% in September and November.
This is the fourth rate cut this year, with the Monetary Policy Committee cutting rates in February, May and August.
Bank of England Governor Andrew Bailey said the Monetary Policy Committee voted 5 to 4 in favor of a rate cut. The decision to cut bank interest rates was ultimately undermined by falling inflation.
Bailey said the bank rate was likely to fall “gradually”, depending on factors such as wage growth and services inflation.
Mark Harris, chief executive of SPF Private Clients, said: “Recent inflation data, while still above the Bank’s 2% target, is moving in the right direction, so a cut in the base rate is a sure thing.
“This news will add to the festive spirit for borrowers, with lenders lowering mortgage rates and keen to attract business to get 2026 off to a strong start.
“With some lenders re-pricing on a weekly basis, it is now possible to secure short-term fixed rates just above 3.5%. Given the usual lull before Christmas, when activity is relatively quiet, we expect rates to fall below that level by the end of December or early January. Five-year fixed rates may take longer to break through the 3.5% barrier, but that could happen in the new year, with rates currently just above 3.7%.”
Ben Thompson, deputy chief executive of the Mortgage Advice Bureau, said bank rate cuts had brought confidence to the mortgage market as it heads towards 2026.
“Whether you’ve been eyeing your first home or are desperate to upgrade, there’s a good chance you’ve been waiting on the sidelines, waiting for interest rates to stabilize,” Thompson said. “However, the market has priced in that stability and mortgage rates have been on a gradual downward trend in recent months.”
Marylen Edwards, head of mortgages at MT Finance, said: “Today’s decision by the Monetary Policy Committee to cut interest rates will be welcomed by borrowers. After the Fed cut interest rates last week, it seems inevitable that the Bank of England will follow suit, especially after inflation fell in November.”
“We hope this move will inject some confidence into the market and we will start to see more landlords as well as owner-occupiers trading in the New Year.”
Steve Cox, chief commercial officer at Fleet Mortgages, said a cut in bank rates would also be welcomed by landlords, although it was not a surprise.
“In many ways, many lenders have been ahead of this particular curve, aggressively pricing it into their products,” Cox said. “Over the past week or so we have seen a series of mortgage rate cuts across the residential and buy-to-let sectors, perhaps in anticipation of this decision and to try to increase transaction volumes and pipeline as we move into 2026.”
“In the buy-to-let sector, product pricing continues to improve, supported not only by this rate change but also by swaps, which are increasingly aligned with the view that further interest rate cuts are likely in 2026.
“This is a positive way to end the year and a promising start to 2026 for landlords.”
