The Bank of England’s Monetary Policy Committee has voted by a majority of 5–4 to reduce Bank Rate by 0.25 percentage points, to 3.75%.
Monetary policy is being set to ensure CPI inflation settles sustainably at 2% in the medium term, the committee said, “which involves balancing the risks around achieving this.”
The extent of further easing in monetary policy will depend on the evolution of the outlook for inflation, but on the basis of the current evidence, Bank Rate is likely to continue on a gradual downward path, the committee added.
Industry reaction
Claire Van der Zant, CEO of Novus Strategy:
“This is the sixth cut in 18 months, pulling the base rate down to a three-year low and finally returning the economy and housing market to the Goldilocks zone that will spur buyer demand next year.
“Sales volumes haven’t set the world on fire in 2025 but greater confidence in improving affordability should translate into higher demand, increased transactions and fewer fall-throughs.
“If volumes do pick up, then 2026 is going to be a fascinating year because we’ll get to find out how many buyers were biding their time as they watched the gap between borrowing costs and the Bank’s 2% target remain stubbornly wide.
“It will also come just as the residential market embarks on a period of transformation powered by horizontal digital integration. So you’ll see rising volumes against a backdrop of tighter lender margins and a growing clamour from consumers for easier, digital customer journeys. The stage is set for 2026 to be a make or break year for digital transformation in the homebuying space.”
Andrew Lloyd, managing director at Search Acumen:
“A cut to 3.75% underlines the Bank of England’s concern about a slowing economy and a softening labour market, particularly after recent data showing back-to-back GDP contraction. This decision will be welcomed across the property market as a further step towards easing pressure on borrowers and restoring confidence after a prolonged period of caution. While inflation remains at watchpoint, the direction of travel is clearly shifting towards supporting growth.
“For buyers, investors and lenders, even modest reductions in borrowing costs can help unlock decisions that have been delayed over the past year. We’re likely to see sentiment improve first, with transaction volumes following more gradually as budgets adjust to better leverage.
“That said, the commercial real estate market is still feeling the impact of Business Rate changes, whilst the prime residential sector absorbs the knock of mansion tax. Markets will still want reassurance that this is the start of a more predictable economic cycle. If rate cuts are sustained into the new year, we could see a more meaningful recovery in property activity as we head into 2026.”
Nicky Stevenson, managing director of Fine & Country:
“This cut will be welcomed by households and lenders alike. While inflation remains above target, the direction of travel matters, and today’s decision should help unlock pent-up demand. Lower rates, combined with a more benign budget backdrop, are likely to translate into stronger enquiries and transactions in the New Year. We anticipate momentum building as affordability improves and confidence returns, setting a positive tone heading into spring.”
Iain McKenzie, CEO of The Guild of Property Professionals:
“Today’s Bank Rate cut to 3.75% is a timely confidence boost for the housing market. With headline inflation easing to 3.2%, below expectations, this move brings borrowing costs to their lowest level in nearly three years and sends a clear signal that conditions are stabilising. For buyers and movers eyeing the New Year, it feels like an early Christmas present. We expect sentiment to continue to improve, supporting activity through the spring 2026 selling season, particularly as the budget landed lighter than many feared.”
Nick Hale, CEO at Movera:
“The decision to cut the base rate has been widely anticipated and will provide a shot in the arm for the housing market. We’re already seeing lenders reducing their rates, increasing affordability for borrowers, and I expect this to be the springboard for a busy 2026 in the mortgage market. Despite the challenging economic environment, buyer demand remains high and this will also stimulate the remortgage market.
“With transactions on the rise, our job is to make sure that we’re ready to continue to support home movers and our partners with digitally transformed and streamlined case progression, where service quality with a personal touch is key – in a market that’s gearing up for growth.”
Nathan Emerson, CEO of Propertymark:
“As we round the year off, it is extremely positive to see the Bank of England in a position where it has the confidence to make what is now a fourth base rate cut within twelve months.
“This, coupled with the fact that we have also witnessed the rate of inflation dip further only yesterday, should help create a strong platform for consumer confidence and affordability as we progress into the new year. In addition, there is real potential for lenders to support first-time buyers with more focused products to help uplift the market over the coming weeks and months.”
Joe Pepper, UK chief executive officer, PEXA:
“The Bank of England’s decision to reduce the base rate signals promising potential for growth in the UK property sector. It’ll be a welcome early Christmas present for those waiting for a reduction in borrowing costs to secure a mortgage or those looking to remortgage as they approach the end of their fixed term.
“But despite the benefit of decreasing borrowing costs and declining asking prices to prospective homeowners, the resulting uptick in home buying activity will undoubtedly add significant pressure on conveyancers and lenders, increasing the risk of delays across the transaction chain.
“This will come to a head in January, a time in which conveyancers already see an uptick in instructions. It will simply pour petrol on the fire, and the back-end infrastructure that supports conveyancers will implode. We must take collective and collaborative action to prevent this, addressing current weaknesses in the system if we have any hope of meaningful change and delivering certain and secure transactions for all.”
