On 18 December 2025, the Bank of England (BoE) cut the base rate from 4% to 3.75%, taking interest rates to their lowest level since early 2023.
This marks the sixth rate cut since last summer and reflects growing concerns about weak economic growth and rising unemployment, even as inflation continues to ease.
The MPC’s decision was narrowly reached in a 5–4 vote, requiring an unprecedented second round of voting. Governor Andrew Bailey emphasised a “gradual and cautious” approach amid lingering inflationary pressures.
Why did the Bank of England cut rates?
The rate cut follows a sharp slowdown in inflation and a lacklustre economic outlook. According to the Office for National Statistics (ONS):
“The Consumer Prices Index (CPI) rose by 3.2% in the 12 months to November 2025, down from 3.6% in October.”
The Bank has also highlighted concerns about rising unemployment and weak growth, with policymakers now expecting no economic growth in the final quarter of 2025.
While inflation remains above the Bank’s 2% target, Governor Andrew Bailey has indicated that the UK has now “passed the peak of inflation”, allowing interest rates to move gradually lower.
The Bank has stressed that any further cuts will be cautious and data-dependent, rather than automatic.
What happens next with interest rates?
The Bank of England has signalled that rates are still likely to move downwards over time, but that future decisions will be more finely balanced.
In its December policy summary, the Bank stated that:
“Rates are likely to continue on a gradual downward path, but with every cut we make, how much further we go becomes a closer call.”
Implications for Mortgage Holders
The rate cut has direct implications for various mortgage products:
- Tracker Mortgages: Homeowners with base-rate tracker mortgages will see immediate reductions in their monthly payments.
- Standard Variable Rate (SVR) Mortgages: Borrowers on SVRs, changes depend on individual lenders. If lenders pass on the full rate cut.
- Fixed-Rate Mortgages: While existing fixed-rate mortgage holders won’t see immediate changes, those nearing the end of their fixed terms may benefit from more competitive rates as lenders adjust their offerings in response to the base rate cut.
How Belle Maison Mortgage Solutions Can Assist
At Belle Maison Mortgages, we understand that changes in the base rate can influence your financial decisions. Our team is dedicated to providing personalised advice to help you navigate these changes, whether you’re considering a new mortgage, looking to remortgage, or seeking protection solutions.
Bank of England Announcement:

Your home/property may be repossessed if you do not keep up repayments on your mortgage.
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