As was widely expected, The Monetary Policy Committee (MPC) at the Bank of England (BoE) has voted to cut the base rate from 4.00% to 3.75%. The committee members voted five to four in favour of cutting the rate at this, the last, base rate review meeting of 2025. Surprisingly, the four members voting against the 0.25% cut voted to hold the rate at 4.00%, indicating that caution persists among the committee.
What is the Bank of England base rate?
The base rate determines how much the Bank of England pays commercial banks for holding money with it. This then influences how much those banks charge customers to borrow money, or pay customers who deposit savings with them. If the base rate goes down, it usually triggers a drop in the interest rate that banks and other lenders charge the public to take out loans, mortgages and credit cards, as well as the interest rate they pay out on savings. If it is held, providers may still change rates, while a base rate hike will usually mean interest rates are increased.
Why has the Bank of England cut the base rate?
Changing the base rate is the Bank of England's way of controlling inflation and influencing UK economic growth.
Although inflation remains above the BoE's 2% target, committee members were likely encouraged by lower than expected inflation data released this week. Inflation fell from 3.6% for the year to October to 3.2% for the year to November largely due to a fall in food cost inflation. Unemployment figures released this week reflected an increase in unemployment, particularly among the younger demographic of working-age people.
The Governor of the Bank of England, Andrew Bailey, having voted with members for the cut to the base rate, commented, "Measures in the Budget should reduce inflation further in the near term. The key question for me now is the extent to which inflation settles at the 2% target in an enduring way."
How has the BoE base rate changed over time?
The graph below shows how the Bank of England base rate has fluctuated dramatically over time, with long periods of stability on either side.
(Source: Bank of England)
Base Rate changes and how they impact you: December 2021 - December 2025
The table below shows the impact of the base rate decisions by the Bank of England since December 2021 on a £100,000 mortgage borrowed over 25 years:
| Date | Interest rate change | Previous interest rate | New interest rate | Change to average monthly mortgage repayments per £100k borrowed* |
| 16th December 2021 | +0.15% | 0.10% | 0.25% | +£8 |
| 2nd February 2022 | +0.25% | 0.25% | 0.50% | +£13 |
| 17th March 2022 | +0.25% | 0.50% | 0.75% | +£13 |
| 5th May 2022 | +0.25% | 0.75% | 1.00% | +£13 |
| 16th June 2022 | +0.25% | 1.00% | 1.25% | +£13 |
| 4th August 2022 | +0.50% | 1.25% | 1.75% | +£26 |
| 22nd September 2022 | +0.50% | 1.75% | 2.25% | +£26 |
| 2nd November 2022 | +0.75% | 2.25% | 3.00% | +£39 |
| 15th December 2022 | +0.50% | 3.00% | 3.50% | +£26 |
| 2nd February 2023 | +0.50% | 3.50% | 4.00% | +£26 |
| 23rd March 2023 | +0.25% | 4.00% | 4.25% | +£13 |
| 11th May 2023 | +0.25% | 4.25% | 4.50% | +£13 |
| 22nd June 2023 | +0.50% | 4.50% | 5.00% | +£26 |
| 3rd August 2023 | +0.25% | 5.00% | 5.25% | +£13 |
| 21st September 2023 | +0.00% | 5.25% | 5.25% | £0 |
| 2nd November 2023 | +0.00% | 5.25% | 5.25% | £0 |
| 13th December 2023 | +0.00% | 5.25% | 5.25% | £0 |
| 1st February 2024 | +0.00% | 5.25% | 5.25% | £0 |
| 21st March 2024 | +0.00% | 5.25% | 5.25% | £0 |
| 9th May 2024 | +0.00% | 5.25% | 5.25% | £0 |
| 20th June 2024 | +0.00% | 5.25% | 5.25% | £0 |
| 1st August 2024 | -0.25% | 5.25% | 5.00% | -£13 |
| 19th September 2024 | +0.00% | 5.00% | 5.00% | £0 |
| 7th November 2024 | -0.25% | 5.00% | 4.75% | -£13 |
| 19th December 2024 | +0.00% | 4.75% | 4.75% | £0 |
| 6th February 2025 | -0.25% | 4.75% | 4.50% | -£13 |
| 20th March 2025 | +0.00% | 4.50% | 4.50% | £0 |
| 8th May 2025 | -0.25% | 4.50% | 4.25% | -£13 |
| 19th June 2025 | +0.00% | 4.25% | 4.25% | £0 |
| 7th August 2025 | -0.25% | 4.25% | 4.00% | -£13 |
| 18th September 2025 | +0.00% | 4.00% | 4.00% | £0 |
| 6th November 2025 | +0.00% | 4.00% | 4.00% | £0 |
| 18th December 2025 | -0.25% | 4.00% | 3.75% | -£13 |
| TOTAL | £190 |
*assumed mortgage term of 25 years
How does the Bank of England interest rate decision affect mortgages?
Fixed-rate mortgage customers
Anyone with a fixed-rate mortgage will not see a change to their mortgage rate or their monthly repayments based on the BoE's decision to cut rates at this review. If your deal is due to end soon, you should still consider how mortgage rates might change in the coming months. Our article 'Will interest rates continue to fall in 2026 & how low will they go?' provides some insight into remortgaging and what to do if you are due to remortgage soon. If your mortgage deal is due to end in less than six months, you can start to shop around and it is beneficial to speak to a mortgage adviser. Mortgage interest rates have been steadily falling over several weeks as a number of lenders have cut rates, so securing a rate ahead of time means you could lock in at a relatively reasonable rate while remaining able to taking advantage of further reductions if they materialise over the coming months.
It is worth remembering that if your current fixed-rate deal was in place prior to December 2021 (before rates first started going up), then you should factor in all of the subsequent base rate rises and cuts in order to budget for the likely increase in your monthly mortgage repayments after you remortgage. As shown in the table above, this equates to a monthly increase of around £190 per £100,000 borrowed, based on a 25-year mortgage term.
Many borrowers choose a long mortgage term when arranging new mortgages or remortgaging existing deals, in order to make monthly repayments more affordable. This may help in the short term for those struggling with higher mortgage interest rates, but it will mean that the debt is carried further into the future and will end up costing them more in interest payments over the long term. Extending your mortgage term should be considered carefully with the help of an independent mortgage expert*.
Variable rate or tracker mortgage customers
Those with tracker or variable-rate mortgages tend to see their mortgage rates (and monthly repayments) change in line with the moves in the base rate. This means that your mortgage rate and repayment amount is likely to be adjusted if it tracks the BoE base rate. If you wish to see what a rate cut by the Bank of England would do to your monthly mortgage payment, you can use our interest rate calculator. You will need to know your initial mortgage term, the amount you borrowed at the start of the deal and your current mortgage rate.
Anyone wanting to know more about how rate rises and cuts impact their finances should speak with an independent mortgage adviser*, as they can provide specialist advice. When considering remortgaging, always check for any Early Repayment Charges (ERC) and look up the remaining term of your current mortgage deal. Take a look at the best mortgage deals by using our mortgage rate comparison tool or by checking out our article 'Best mortgage rates in the UK'.
Help if you're unable to afford your mortgage payments
Many mortgage holders continue to be faced with increasing mortgage costs due to the rise in mortgage interest rates since 2021. If you are worried about how you will afford your mortgage, then you should get in touch with your lender as soon as possible. Your lender should be able to find a solution that can help ensure no repayments are missed.
Potential solutions can include extending the length of your mortgage, converting part or all of your repayment mortgage to an interest-only mortgage, or allowing you to take a mortgage payment holiday.
Check out our article '7 tips for dealing with mortgage arrears'. Alternatively, you may find additional support from the following organisations helpful:
How does the Bank of England base rate decision affect you if you have credit cards, loans or overdrafts?
Credit cards
If you have an existing credit card with an agreed interest-free period or promotional interest rate, you shouldn't notice any impact from the Bank of England base rate announcement.
Keep in mind that 0% credit cards are the best way to avoid any base rate fluctuations, by not paying interest at all. For example, by moving your existing credit card balance to a 0% balance transfer credit card, you ensure you pay no interest on your repayments if the balance is repaid within the promotional interest-free period. Be aware that most (not all) balance transfer credit cards charge a balance transfer fee, usually somewhere between 2% and 5%. Find out more in our article, 'Best 0% balance transfer credit cards'.
Loans
If you already have a loan with a fixed interest rate then you are unlikely to be affected whether the base rate is changed or not. If you are looking for a new loan then you can compare the best loan deals in our article 'Best personal loans'.
Overdrafts
The interest rate charged on your overdraft may be affected as a result of the base rate decision. If your bank or building society is going to change the rate of interest charged, you should receive notification in advance, but it can take time for the change to be communicated.
How does the Bank of England base rate decision affect you if you have savings?
Although interest rates on savings accounts can remain unaffected when the base rate is cut, providers usually change interest rates on savings products and existing savings promotions may be pulled from the market. You may see some changes to the interest rate paid on your savings, unless you have a fixed-rate bond, for example, over the coming weeks and months.
This also means that it is possible that we may have already hit the peak of high interest rates on savings accounts, so now might be a good time to secure the best rate on your savings. Our article, 'How to get more than 5% interest on your savings' summarises some of the best rates on the market and our regularly updated article 'Best savings accounts in the UK' provides a summary of the best savings rates for personal and business accounts.
Looking for the top savings rates should always involve shopping around for the right deal. You can check out the highest savings rates using our Savings Best Buy tables. Right now you can get as much as 7.5% interest on a Regular Saver account.
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