Bank of England Set to Cut Interest Rates This Week – Latest Forecast, Analysis and What It Means for UK Mortgage Holders

With the Bank of England due to announce its December decision on Thursday 18 December 2025, markets and many forecasters are leaning towards a cut from 4.00% to 3.75%. For mortgage holders, the key point is that fixed-rate pricing is usually driven as much by swap rates and gilt yields (which move ahead of decisions) as by the Bank Rate itself.

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What Is Moving UK Mortgage Pricing

Fixed-rate mortgages are typically priced off lenders’ funding costs and expectations for where interest rates will be over the fixed period. Those expectations show up in SONIA swap rates (a market measure linked to future overnight interest rates), which can move daily even if the Bank Rate is unchanged.

That’s why mortgage rates can fall (or rise) in advance of a Bank of England meeting: lenders may reprice when swaps move, not only when the Bank actually changes the Bank Rate.

The Latest Rate-Cut Forecast For This Week

The Bank of England’s Monetary Policy Committee decision is scheduled for 12:00 (London) on Thursday 18 December 2025.

In the run-up to this meeting, reporting on market pricing and economist expectations has pointed to a probable cut to 3.75%, though the vote could be close.

A practical wrinkle for borrowers: the Office for National Statistics is due to publish CPI inflation for November 2025 at 07:00 on Wednesday 17 December 2025 — the day before the Bank decision — which can influence market rates (and, in turn, fixed mortgage pricing) very quickly.

Inflation And The Data The Bank Is Watching

The latest published CPI reading at the time of writing was 3.6% in the 12 months to October 2025, down from 3.8% in September, according to the Office for National Statistics. That direction of travel matters because the Bank of England targets 2% inflation over time.

Even if the Bank cuts this week, it does not automatically mean a straight line down for mortgage rates. The Monetary Policy Committee can still be cautious if it believes inflation pressures could persist (for example, via wages, services inflation, or renewed energy/food price pressures).

What This Could Mean For Fixed-Rate, Tracker And SVR Borrowers

Fixed-rate mortgages
If markets have already priced in a cut, some of the benefit may already be reflected in swap rates and lenders’ fixed-rate pricing. That said, fixed rates can still change after the decision depending on the tone of the minutes (how divided the Committee is and how it frames the next few meetings).

Tracker mortgages
Trackers usually move in line with the Bank Rate (often at “Bank Rate + a margin”), so a cut — if it happens — can feed through relatively quickly, subject to the terms of the mortgage.

Standard Variable Rate (SVR) mortgages
SVRs are set by lenders and may not move one-for-one with Bank Rate changes. Some lenders pass on reductions quickly, others adjust more gradually, and changes can vary by customer/product. (Rates can also change for other reasons, such as funding costs.)

Buy-to-let mortgages
Buy-to-let pricing is influenced by the same market forces (swaps and funding costs), but affordability and rental coverage rules can mean actual borrowing capacity reacts differently even when headline rates move.

Key Numbers Borrowers Often Watch

• Bank Rate: 4.00% (current; next decision due 18 December 2025)

• ONS CPI inflation: 3.6% year-on-year (October 2025; released 19 November 2025)

• Indicative SONIA swap rates (snapshot shown): 2-year 3.45%, 5-year 3.58% (figures shown as at 03/12/2025 on this source)

• Next inflation release: CPI for November 2025 due 17 December 2025 at 07:00 (London)

Figures as of 15 December 2025, London.

The information provided in this article is for general guidance only and does not constitute personal or regulated financial advice. If you’d like to understand what these moves could mean for you, speak to Mortgage One, we can explain your options and timings based on your specific circumstances.

Some Buy to Let mortgages are not regulated by the Financial Conduct Authority.

FAQs

1) Is the Bank of England definitely cutting rates on 18 December 2025?
No. The decision is not confirmed in advance. Many market participants have been leaning towards a cut, but the Monetary Policy Committee could still vote to hold if it thinks inflation risks remain too high.

2) If the Bank cuts, will fixed mortgage rates drop immediately?
Not necessarily. Fixed-rate pricing often reflects swap rates and market expectations that can move before (or after) the decision. Some changes are gradual and differ by lender and product.

3) What matters more for fixed rates: Bank Rate or swap rates?
Both matter, but day-to-day fixed-rate pricing is often more closely linked to swap rates, because swaps capture expectations for future interest rates over the fixed period.

4) Why does inflation data on 17 December matter for mortgages?
Inflation releases can change market expectations for future interest rates, which can move swap rates and gilt yields quickly — and those moves can influence lenders’ pricing decisions.

5) What happens to tracker mortgages if Bank Rate falls?
Many trackers move with Bank Rate (plus a margin), so payments can fall when Bank Rate falls, subject to the terms of the mortgage.

6) Could mortgage rates rise even if the Bank cuts?
Yes. If markets interpret the decision or the minutes as higher for longer overall, or if swap rates rise for other reasons, lenders can reprice fixed rates upward even in a cutting cycle.