The Bank of England has today confirmed a 0.25 percentage point cut to the UK base interest rate, reducing it from4.00% to 3.75% - the lowest rate since February, 2023.
The move marks the sixth reduction since August 2024 and follows confirmation yesterday that inflation has fallen to 3.2%, reinforcing expectations that borrowing costs would continue to ease heading into the New Year.
The Monetary Policy Committee’s decision was not unanimous, passed by a majority of 5 votes to 4 and reflecting continued caution around the pace at which rates can be lowered further.
Andrew Bailey: cautious optimism
Speaking after the announcement, Bank of England Governor Andrew Bailey – whose vote swung the decision - said: “We still think rates are on a gradual path downwards.”
He added that while inflation has eased significantly, future decisions will remain data dependent, with the Bank closely monitoring domestic cost pressures and wider economic conditions as it looks towards 2026.
They think the inflation announcement yesterday together with measures in the Budget could see inflation hit the 2% target next year.
What this means for the property market
Today’s cut is expected to provide a signal of confidence for the property market, particularly for buyers and movers who have been waiting for greater certainty on mortgage rates.
While further reductions are likely to be gradual, the continued downward direction of interest rates should help support buyer sentiment and transaction activity throughout 2026.
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