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Homeowners with variable rate mortgages will see their monthly payments reduced after Bank of England On Thursday, it reduced its base rate from 4 percent to 3.75 percent.
The move is being interpreted as confirmation by the government that Rachel Reeves‘Strategy after £36 billion tax rise in Budget.
However, the bank also issued a warning about inflation due to low economic growth.
The analysis shows that the average homeowner on a tracker mortgage could save around £29 every month after the quarter-point deduction. UK Finance specified that, based on normal outstanding balances, tracker borrowers would see their repayments fall by £28.77.
Meanwhile, those on a standard variable rate (SVR) mortgage are estimated to save £13.88 monthly, assuming the lender takes full advantage of the rate cut.
Lenders make their own determination svr But in practice they often follow the movements of the Bank of England base rate.
According to UK Finance, there were around 533,000 homeowner tracker mortgages outstanding in June 2025, with around 509,000 SVR deals also outstanding.
Keir Starmer took to X (formerly Twitter) to celebrate his sixth rate cut since becoming Prime Minister 18 months ago.
He said: “We have cut interest rates for the sixth time since the election. This is welcome news for working families across the country. We are doing more to tackle the cost of living crisis: expanding free breakfast clubs, cutting the average energy bill by £150 next year and cutting rail fares. I know there are families who are still struggling – we are taking action to bring costs down.”
Chancellor Rachel Reeves, whose Budget paved the way for the cuts last month, said: “Today’s interest rate cut is the sixth since the election, the fastest pace of cuts in 17 years and good news for households with mortgages and businesses with debt.”
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But Tory Shadow Chancellor Sir Mel Stride said: “The Chancellor is claiming today’s rate cut as a sign of success – but let’s look at what the Bank of England actually said. The Bank is concerned about ‘medium-term inflation risks from weak demand’ due to rising unemployment and low growth.”
While this cut won’t immediately impact homeowners with fixed-rate mortgages, it could be good news for those whose deals are set to expire soon.
According to UK Finance figures, around 1.8 million fixed rate deals are due to expire in 2026.
Property Professionals are now expecting the new year to start with a “bang” as lenders try to attract borrowers and bring activity back into the housing market after Christmas.
david hollingworthThe associate director at mortgage broker L&C Mortgage said: “Fixed rates have improved significantly and options have improved for those still approaching the end of the extremely low five-year fixed rate.
“Lenders are competing harder and there may be more scope for lenders to improve their rates in the new year when they want to get off to a good start.
“Although rates are already expected to be cut further next year, the market remains likely to see a further decline in rates.”
Ian McKenzie, Chief Executive of The Guild of Property The pros said: “For buyers and movers with an eye on the New Year, this feels like an early Christmas gift.”
Andrew Montlake, chief executive of Corco Mortgage Brokers, said: “Borrowers will be doing some celebrating in the run-up to Christmas.”
Nathan Emerson, chief executive of Propertymark, the property professionals’ body, said: “There is real potential for lenders to support first-time buyers with more focused products to help lift the market over the coming weeks and months.”
Jason Tabb, President of OnTheMarket, said: “With Budget The uncertainty is now gone and this rate cut provides a real boost for the housing market ahead of Christmas which bodes well for activity in the New Year.
Ed Monk, pensions and investment expert Fidelity InternationalSaid: “The year-end rate cut is an early holiday gift to borrowers – and there is reason to expect more cuts in 2026.”
Matt Smitha mortgage specialist move rightSaid: “Financial markets and mortgage lenders had been expecting a (Bank of England base rate) cut today for some time, and so reacted quickly with a mortgage rate cut in December to finish the year.”
Nicky Stevenson, managing director of Fine & Country, said: “Lower rates, with more gentleness Budget The backdrop is likely to translate into stronger inquiries and transactions in the new year.
Mark Manning, managing director of Northern Estate Agencies Group, said: “I expect 2026 to start with a flurry of activity as mortgage rates become even more competitive and people use the festive period to start planning their next move.”
A fall in the base rate could also lead to more modest returns for some savers, who will also have to take into account the diminishing impact of inflation on their cash.
National Statistical Office ,ons) Data released earlier this week showed that consumer price index (CPI) inflation stood at 3.2% in November, down from 3.6% in October.
Paul Broadhead, head of mortgage and housing policy at the Building Societies Association, said: “Falling rates coupled with pending changes to savings taxation will be felt by those who are working hard to build financial resilience and save for their future, including saving for a first time home deposit.”
According to Moneyfactscompare.co.uk, the average easy access savings rate in the market has fallen from 2.96% in December 2024 to 2.54% in December 2025, while the average easy access there is one The market rate has decreased from 3.16% to 2.73% compared to last year.
Over the same period, the average Notice Account rate on the market has fallen from 4.10 per cent to 3.50 per cent and the average Notice Isa rate has fallen from 3.97 per cent to 3.40 per cent.