Bank of England Cuts Base Rate to 3.75% in Pre-Christmas Boost for Homeowners

In a decisive move this morning, the Bank of England’s Monetary Policy Committee (MPC) voted 7-2 to slash the base interest rate by 0.25 percentage points, bringing it down to 3.75%—the lowest level since early 2023. The announcement, delivered by Governor Andrew Bailey at Threadneedle Street, comes as a welcome early Christmas gift for millions of mortgage holders and businesses across the UK who have weathered tight borrowing conditions for the last two years.

The decision follows the Office for National Statistics (ONS) report released on Tuesday, which confirmed that UK inflation has stabilized at 1.9%, slightly below the Bank’s 2% target. “The data is clear,” Governor Bailey stated during the press briefing. “Price stability has been restored, and our focus must now shift to supporting sustainable growth as we head into 2026.”

The reaction from the City was immediate. The FTSE 100 jumped 85 points within minutes of the announcement, driven largely by rallies in housebuilding stocks like Taylor Wimpey and Persimmon, which are expected to benefit from cheaper mortgages. High street lenders have already started reacting; Santander and HSBC announced sub-4% fixed-rate mortgage products available starting Monday.

However, the news isn't positive for everyone. Savers, who have enjoyed higher returns on their cash ISAs, will likely see interest rates dip in the coming weeks. Despite this, the British Chambers of Commerce (BCC) hailed the move as "the vital oxygen UK business needed," predicting that the lower cost of borrowing will unlock stalled investment projects in the manufacturing and green tech sectors before the fiscal year ends.