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BoE Cut Base Rate to 3.75% | What it Means for Your Mortgage [December 2025]
The Bank of England has voted to cut the base rate to 3.75% in December, the lowest it has been for three years. What does this mean your mortgage?
Earlier this year, the Bank of England began easing monetary policy. In February, the base rate was reduced to 4.5%, followed by a further cut to 4.25% in May. After August’s reduction to 4.0%, the rate has since been held steady — reinforcing expectations that the next move could be another gradual cut.
Mortgage borrowers on fixed-rate deals have already seen gradual reductions since the start of the year, while those on tracker mortgages have benefited from greater stability over recent months.
Looking ahead, around 1.8 million fixed-rate mortgages are due to end in 2025. While rates remain higher than they were 3–5 years ago, this lower base rate will come as welcome news for homeowners preparing to remortgage.
At Clifton Private Finance, we’ve already seen multiple lenders reduce rates across a wide range of products in anticipation of this base rate vut, with many competitive options now priced below 4%.
Here's a current snapshot (updated live):
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Key Takeaways
- The Bank of England has cut the base rate to 3.75%, continuing its gradual easing of borrowing costs.
- Homeowners on tracker mortgages will see their monthly payments reduce, while fixed-rate borrowers are likely to benefit as lenders continue to lower mortgage rates.
- Falling mortgage rates could improve affordability, helping first-time buyers and home movers enter the market with greater confidence.
- With approximately 1.8 million fixed-rate deals ending in 2026, the base rate cut comes at a crucial time for homeowners considering a remortgage.
Why Did the Rate Drop?
Over the past two years, the Bank of England has taken a hawkish stance towards the base rate. But with inflation only slightly higher than the Bank of England's 2% target and a need to stimulate more economic growth, industry experts widely expected another cut.
The base rate is the main way that the Bank of England controls inflation, so if inflation rises significantly, it's likely the bank rate would be increased again - keep an eye on inflation figures if you want a better idea of where rates may be heading next.
In 2024, mortgage rates fluctuated in response to bouts of economic uncertainty sparked by the Autumn Budget, overseas elections and other geopolitical influences.
It’s unlikely that interest rates will return to the super-low levels we saw before 2022, but five-year fixes dropping consistently across the board is certainly a sign that there are more reductions to come.
In this article, our mortgage brokers weigh in on the discussion, and we analyse the bigger picture of the UK economy, inflation, and the mortgage market in this article.
See similar: Are Mortgage Rates Going Down?
What Do Our Experts Say?
George Abouzolof
Senior Finance Broker CeMAP
After the 2025 Autumn Budget, the Bank of England has reduced the base rate, signalling increased confidence that inflation is moving in the right direction.
Measures announced in the Budget are expected to place some pressure on household spending, which can help ease inflation over time.
For mortgage borrowers, this shift may start to feed through into pricing, although lenders will continue to respond cautiously to ongoing economic conditions.
Read blogs: Should You Get a Tracker or Fixed Rate Mortgage in 2024?
The graph below shows how the bank rate has increased since mid-2021 and is now dropping back down.
(Credit: Bank of England)
How Does Inflation Influence the Bank Rate?
The country is recovering from high inflation rates that led to an elevated cost of living in 2022. The Bank of England controls inflation primarily by adjusting the bank rate, which determines the cost of borrowing across the nation. Higher interest rates mean that borrowing is more expensive, which limits economic activity.
Reduced economic activity will typically cause inflation to fall. However, it's also important that inflation doesn't fall too low. If this does happen, people may put off spending en masse in hopes that prices will drop. When spending stops completely, whole systems and companies can come to a grinding halt.
The aim is to keep inflation low and stable.
How Did Inflation Get So High?
COVID-19 caused a shortage in products and services in 2020, and this demand led to increased prices. Then, Russia’s invasion of Ukraine impacted energy and food prices. Finally, it became evident in 2022 that thousands of people had left the workforce following the pandemic. This pushed up hiring costs, and many businesses subsequently raised their prices.
These three major hits to the economy contributed to the current cost-of-living crisis. Because major events have a relationship with inflation, the long-term view on inflation is never set in stone, but experts can make an educated guess with the data they do have.
Inflation is now close to the BoE's target of 2%, which many feel is the primary reason the bank has lowered interest rates.
Now that the base rate has been dropped again, many experts are confident that we'll see a slight uptick in inflation, but there may well be room for further base rate reductions in the future.
How to Find an Affordable Mortgage in 2025
Despite the optimism about declining mortgage rates, deciding on the best option can be daunting and confusing.
We can help you compare mortgage products and their costs to find the best deal for your specific situation from a wide range of lenders nationwide.
Expert mortgage advisors have a finger on the pulse of the latest mortgage market news. Whether you're a first-time buyer, looking to refinance, or investing in a buy-to-let, we can help you understand your mortgage options so you feel confident you're making the right choice.
To see what we can do for you, call us at 0203 900 4322 or book an appointment below.
