The Bank of England cut its base rate to 3.75% from 4% on Dec. 18, marking the fourth cut of 2025.

Decision and inflation backdrop

The Monetary Policy Committee voted 5–4 to reduce the rate to 3.75%, with four members voting to hold at 4%.

The base rate is used to influence inflation by affecting borrowing costs and savings returns.

CPI inflation was 3.2% in the 12 months to November, down from 3.6% in October, but still above the Bank’s 2% target.

The Bank said the risk of inflation persistence has “become somewhat less pronounced,” and that rates were “likely to continue on a gradual downward path.”

Mortgages and savings impact

Tracker mortgage rates are expected to drop by 0.25 percentage points.

Lewis said a 0.25% reduction is equivalent to about £15 less per month per £100,000 of mortgage.

Fixed-rate mortgages do not change until the fixed period ends, and new fixed deals may only move slightly because the cut was widely expected.

Variable-rate mortgages may fall by up to 0.25 percentage points, though lenders are not required to pass on the full cut.

Variable-rate savings, mainly easy-access accounts, may drop within two to four weeks.

Fixed-rate savings may already reflect the cut, but could be reduced further.

Credit cards and loans

Credit cards are “mostly unaffected,” with typical APRs cited at 24.9%.

Existing loans are usually fixed and unaffected, while new loan rates may edge down only marginally over time.