AS widely anticipated, the Bank of England cut rates by 0.25% today, taking the base rate to 3.75%.
Five members (Andrew Bailey, Sarah Breeden, Swati Dhingra, Dave Ramsden and Alan Taylor) voted in favour of the proposition. Four members (Megan Greene, Clare Lombardelli, Catherine L Mann and Huw Pill) voted against the proposition, preferring to maintain Bank Rate at 4%.
This comes after yesterday’s larger-than-expected drop in UK inflation, from 3.6% to 3.2%.
Business owners and financial experts have shared their thoughts on the cut, which was closer than many had expected.
Kylie-Ann Martin, Director at Selby-based KAG Financial, a mortgage broker, said the base rate reduction was priced in, with many lenders having already reducing rates over the past week, but much needed.
She said: “It’s exactly what buyers need right now. The housing market has had a knock in confidence over the past few years, with shaky interest rates. However this reduction and many lenders now offering fixed rates below 4% is definitely a move in the right direction.
“Many people we have spoken to have felt rates have been too high for them to move over the past few years, so this will hopefully provide the good news they have been waiting for.
“We expect to see more first time buyers and home-movers next year, and this news will give them the confidence that the timing is right.”
Will not make a one-eyed otter of a difference
But Anita Wright, Chartered Financial Planner at Ribble Wealth Management, said families will not feel positive effects from the cut.
She continued: “The Bank of England has had to cut rates to show it is doing something to ‘stimulate the economy’. However, with inflation still remaining sticky and showing no clear signs of easing, gilt yields still hovering around the 4% level and edging up, unemployment rising, and interest payments on government debt at their highest ever, this quarter-point cut will not make a one-eyed otter of a difference for most households in the near term.
“Monetary policy is trying to ‘nudge’ demand, but these wider constraints mean the lived reality for many people will not change materially. The next thing we are likely to see is fiscal stimulus, which could drive inflation higher again, weaken the pound further, and leave the Bank fighting the same battle all over again. You could say that the UK is in self-destruct mode, so Governor Bailey should not oversell what this cut can achieve.”
Michelle Lawson, Director at Fareham-based Lawson Financial, said the cut is good news.
She added: “At last a bit of good news for borrowers to end the year on all be it widely expected. Confidence does appear to be returning to the markets ready for a positive start out the blocks in January.
“This rate cut only applies to those on trackers but should trickle down to the fixed rate markets too in the New Year as lenders prepare for a strong 2026. Savers won’t be happy but more creativity is needed in the market place to encourage investment.”
At last a bit of good news for borrowers
Prem Raja, Head of Trading Floor at Currencies 4 You, a forex broker, said while the cut is good news for some, it’s less so for others: “After yesterday’s inflation data, it came as no surprise today that the Bank of England cut rates, as expected by 25bps.
“This is great news for borrowers and the UK property market as a whole, but bad news for Sterling and savers. So far Sterling is down around 0.5% on the week, and with forward guidance for further cuts in 2026, it seems the future looks bleak for the Pound, but hopefully more positive for the UK economy.”
Craig Fish, Director at London-based Lodestone Mortgages, said: “The Bank of England’s 0.25% base rate cut marks a turning point in the interest-rate cycle and reflects growing confidence that inflation is coming under control.
“While this won’t trigger an immediate drop in mortgage rates, it does reinforce the downward trend already taking shape. Mortgage pricing is driven by swap rates rather than the base rate itself, and lenders have been anticipating this move for some time.
“We’re therefore likely to see further, gradual improvements in fixed-rate deals over the coming weeks, particularly for borrowers with strong equity or larger deposits.
“Fixed rates still provide valuable certainty, while trackers may suit those comfortable with short-term volatility. Confidence is returning, but this remains a market where good advice matters more than ever.”
It’s likely to help push mortgage deals cheaper
Justin Moy, Managing Director at Chelmsford-based EHF Mortgages, expects mortgage rates to get cheaper on the back of today’s cut.
He said: “This was an inevitable cut in the base rate that has long been hard-baked into the fixed rates currently available, but it’s likely to help push mortgage deals cheaper in the new year.
“Those on tracker deals will be delighted to feel the full 0.25% cut, saving around £42pm in interest on a typical £200,000 mortgage. Lenders will look for a fast start to 2026, and they will throw everything at borrowers to win business.”
Darryl Dhoffer, Founder at Bedford-based The Mortgage Geezer, said it’s bad news for savers.
He added: “The BoE has blinked, cutting rates to 3.75% after inflation fell to 3.2%. This wasn’t a victory lap, it was a necessity for Broken Britain. The economy is stalling, forcing Governor Bailey’s hand. For borrowers it’s a small win. It signals the peak is over and potentially offers slight mortgage relief, but 3.75% is still painful relative to recent history.
“For savers it’s bad news. The brief golden era is fading. Returns will drop, and with the cost of living still high, your money is working less for you. My message to Governor Andrew Bailey is simple: This 0.25% cut is too timid. You’ve treated the inflation fever by starving the patient. High streets are crumbling; we need shock therapy, not a nervous shuffle. Cut faster before stagnation becomes permanent.”
Dariusz Karpowicz, Director at Doncaster-based Albion Financial Advice, said the cut was a present to borrowers and businesses from the Bank of England but had hoped for a bolder 0.5% cut.
He said: “The Bank of England has finally given borrowers a Christmas present, cutting the base rate to 3.75%. But my message to Governor Bailey is that a 0.25% cut feels cautious when bolder action could have given the housing market and economy a proper boost heading into 2026.”
Absolutely essential for the survival of the UK economy
Tony Redondo, Founder at Newquay-based Cosmos Currency Exchange, said: “The UK still has the highest inflation rate among the G7, and an inflation rate of 3.2% remains 60% above target. According to economic theory, the BoE should not have cut rates today. Still, in practice, it was absolutely essential for the survival of the UK economy that it did so with a dovish outlook for 2026.
“Today’s rate cut is welcome news for borrowers. Savers will suffer as returns on easy-access accounts fall below 4%, hitting pensioners relying on interest income particularly hard. Some will argue the cut doesn’t go far enough, given the UK economy has stagnated, but the Bank wants to avoid reigniting inflation.
“Governor Bailey, this measured approach strikes a reasonable balance, but don’t be complacent. Inflation remains well above the 2% target, and services inflation stays sticky. The economy may need further support ahead. What matters most now is clear communication about your next moves.”
David Stirling, Independent Financial Adviser at Belfast-based Mint Wealth Ltd, said falling inflation meant a cut was needed.
He added: “Falling inflation has given Threadneedle Street just enough courage to blink, yet this cut is more a polite nod than a grand gesture, meaning savings rates are likely to drift south while borrowers get a modest pat on the back.
“This will bring potential relief for borrowers but indigestion for savers, and a reminder that in monetary policy there are always losers.”
Bring potential relief for borrowers
Aaron Strutt, Product and Communications Director at London-based Trinity Financial, said the economy should be boosted by the cut.
He continued: “The money markets have been predicting a base rate cut for quite some time now but the latest unemployment and inflation data has no doubt made the monetary policy committee’s decision a bit easier. By cutting the cost of borrowing the hope is the economy will get a boost and mortgage rates will come down a bit more.
“While the government have tried to keep the economy stable they have made some big tax changes that have led to a general lack of confidence and the thought that there is more economic pain to come.
“There is increasing talk that bank rate will have to get much cheaper to support the economy next year and with multiple base rate cuts expected more borrowers will probably opt for tracker rates while they see if fixes come down and get more competitively priced.
“UK housing and mortgage markets are set to experience growth through 2026 and 2027 with growth to come from rising mortgage lending volumes, supported by falling rates, improving affordability and looser regulation.”
Photo by Alex Gruber on Unsplash
