Following the Bank of England’s decision to cut the base rate to 3.75%, please find below the latest reaction from Mortgage Advice Bureau, the UK’s leading mortgage intermediary. 
 

Ben Thompson, Deputy CEO, Mortgage Advice Bureau:

 

“The much-anticipated final base rate cut of the year is the strongest signal yet that the government’s commitment to taming inflation and stabilising the economy is paying off. This latest move from the Bank of England – in addition to yesterday’s news that inflation has fallen to 3.2% – should give us all a much-needed boost of confidence to plan for the year ahead.

“Whether you’ve been eyeing up your first home or are desperate to move up the ladder, there’s a high chance you’ve been stuck watching from the sidelines waiting for rates to settle down. However, the market has already priced in this stability, and mortgage rates have already been on a gradual downward trend over recent months.

“If you’ve been thinking homeownership is out of reach, think again. There’s a broad range of options out there to give you a helping hand, and an expert mortgage adviser can cut through the noise and find the right deal for your circumstances. Working in your corner, they can help you get onto the property ladder sooner than you think, so you can start 2026 exactly as you mean to go on.”

 

Outlook for future cuts a little cloudy as MPC cleaved down the middle

 

Commenting on the latest BoE interest rate decision, Neil Wilson, Saxo UK Investor Strategist said: “The Bank of England cut rates but it remains divided. We knew from the November meeting that Governor Andrew Bailey was leaning towards a cut this month, but it’s finely balanced still. The slight undershoot in inflation and the dampening labour market probably swung things enough for the doves. But inflation remains too high and if anything, despite the tax hikes in the Budget, there is a fiscal stimulus (albeit modest) next year. This makes the outlook for future cuts a little cloudy, and we know that the MPC has basically cleaved down the middle into two camps of hawks and doves, with Bailey sitting in the middle. That means it only requires one or two members to shift their view to radically alter the pace and extent of rate cuts next year. But inflation is coming down just as the economy is on life-support, so further cuts in Feb and Apr should be expected, with ultimately a 3% Bank Rate at the end of this easing cycle.”

 

BASE RATE VIEW: Despite cut, banks still keen to meet end-of-year deposit targets = still plenty of inflation-beating rates on offer

 

Following today’s Bank of England base rate cut, Katie Horne, savings expert at [www.flagstoneim.com]Flagstone, comments:

  • Many banks had already largely factored in a base rate cut at the next MPC meeting and priced it into the savings rates on offer. And with banks keen to meet their end-of-year deposit targets, there should be plenty of products available whose rates beat inflation.

  • Using some of the festive period to spring-clean your savings accounts and take advantage of many of the competitive year-end rates available could be time very well spent.

  • A base rate cut typically means savings rates will begin to soften, so now is a good time for savers to take advantage of the higher rates still available in the market before they adjust further.

  • The Bank’s decision to cut the base rate reflects mounting concerns about sluggish economic growth, reinforced by the unexpected 0.1% contraction in GDP in October and a 0.1% fall across the three months to October. Combined with a tight vote at the last meeting, an unexpected fall in the rate of inflation to 3.2% in November  and early signs of mortgage lenders engaging in a rates war, the case for a cut had become increasingly difficult to ignore.

  • There can be some advantages to lower interest rates. Slightly softer rates may cushion the impact felt by savers of the Treasury’s decision not to change the Personal Savings

 

Inflation data has cleared path for more aggressive rate cuts in 2026

 

“The Bank of England looks almost certain to deliver a 25 basis point cut, taking rates to 3.75%. But while today’s decision is the foregone conclusion – next year’s outlook is the crucial element. Yesterday’s inflation data has handed the BoE the justification it needs to move more aggressively in the new year. With headline inflation undershooting expectations and wage pressures finally easing, the obstacles to further cuts are rapidly disappearing.

“Governor Andrew Bailey’s guidance will set the tone for early 2026. And the committee’s updated forecasts will be crucial. If they downgrade inflation projections for 2026, that effectively pre-announces further easing. Markets are already pricing two to three cuts next year, and that could shift higher if the BoE signals comfort with the inflation outlook.”

 

BoE and ECB in focus today

 

The Bank of England is widely expected to cut rates today, with markets still pricing roughly an 85% chance of a move following yesterday’s encouraging inflation data. The combination of easing wage pressures, rising unemployment and a renewed disinflation trend gives the BoE room to act, even as inflation remains above target and growth data signal ongoing economic weakness.

Because of these risks, any cut is likely to be paired with cautious messaging. Policymakers will emphasise data dependence and avoid committing to a rapid easing cycle. For markets, a cut should be supportive for the FTSE, while sterling may see two-way volatility as lower yields weigh on GBP, but improved macro confidence offers some offset.

The European Central Bank, by contrast, is almost certain to leave rates unchanged today, with markets assigning nearly a 100% probability to a hold. The ECB has already front-loaded easing and now enjoys inflation readings close to target, giving it little incentive to adjust policy at this meeting.

As a result, Christine Lagarde’s communication will be more important than the decision itself. Investors will focus on any hints about the timing of the next potential cut and how the ECB interprets the recent softness in eurozone growth. The euro is unlikely to move significantly on the decision alone but may react to nuances in the forward guidance, while broader European assets remain more sensitive to global risk sentiment than to the ECB’s near-term policy stance.



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