BoE Cuts To 3.75%: What Global Rate Cuts Mean For UK Mortgage Rates

The Bank of England has cut Bank Rate to 3.75%, confirming that the UK is now further into an easing cycle. For mortgage borrowers, the key question is not only where the base rate sits today, but what markets think comes next — because those expectations feed directly into wholesale funding costs and, in turn, fixed mortgage pricing. Global rate moves matter too: when major central banks such as the US Federal Reserve cut rates, they can influence global bond markets and sentiment that affect UK swap rates.

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What Is Moving UK Mortgage Pricing

UK mortgage pricing is mainly driven by two channels.

For variable-rate borrowing, such as tracker mortgages, pricing tends to be more directly linked to the Bank of England base rate, alongside lender margins and product features.

For fixed-rate mortgages, lenders typically hedge and fund through wholesale markets. In the UK, swap rates — often linked to SONIA — are a key reference point. When swap rates fall, lenders may have scope to reduce fixed-rate pricing; when swap rates rise, fixed deals can become more expensive.

The Bank of England’s December cut to 3.75% matters because it can shift expectations about the future path of rates. Those expectations are one of the drivers of swap rates and UK gilt yields, both of which feed into mortgage pricing.

Bank Of England Cut To 3.75%: What Happened

At its meeting ending on 17 December 2025, the Monetary Policy Committee voted 5–4 to reduce Bank Rate by 0.25 percentage points to 3.75%, down from 4.00%, with four members voting to hold.

In its consumer-facing explanation of the decision, the Bank of England noted that inflation has fallen sharply from its peak and said it expects Bank Rate is “likely to fall gradually further”, while stressing this will depend on incoming data such as pay growth and services inflation.

For mortgage borrowers, this guidance can be influential because fixed-rate pricing often reflects where markets think rates are heading over the next two to five years, not only today’s base rate.

What The Fed’s Latest Cut Can Signal For UK Rates

In the US, the Federal Reserve’s rate decisions can matter for the UK mainly through global financial conditions. On 10 December 2025, the Federal Reserve published its policy decision and statement, setting out the Committee’s assessment of inflation and employment risks.

Although the Federal Reserve does not set UK rates, its actions can influence US Treasury yields and global bond market sentiment. Those moves can spill over into UK gilt yields and sterling swap markets, which UK mortgage lenders closely watch when pricing fixed-rate deals.

Inflation Backdrop: Why It Matters For Mortgages

Inflation remains a central input into both base rate decisions and market expectations. In the UK, CPI inflation was reported at 3.6% in the 12 months to October 2025, down from 3.8% in September.

Falling inflation does not automatically mean mortgage rates fall. However, it can support a narrative of gradual easing, which markets may price into swap rates. Mortgage pricing can still be volatile if energy prices, wage growth or services inflation remain sticky, or if global bond yields move sharply.

Swap Rates And Funding Costs: The Link To Fixed Mortgages

Swap rates act as a key bridge between central bank expectations and fixed mortgage pricing. In simple terms, a swap rate reflects the market-implied cost of exchanging a variable interest rate for a fixed one over a set term, which is closely linked to how lenders manage interest rate risk on fixed mortgages.

SONIA (Sterling Overnight Index Average) is a benchmark based on actual transactions in the sterling overnight market and is published every London business day.

When markets become more confident that interest rates will fall gradually, swap rates can decline. That can give lenders more room to reduce fixed-rate mortgage pricing, although lenders also factor in competition, operational capacity, capital requirements and risk appetite.

It is also worth noting that base rate cuts can already be “priced in” to fixed-rate deals ahead of the decision. This is one reason borrowers sometimes see fixed rates move before a Bank Rate announcement.

What This Could Mean For First-Time Buyers, Homeowners And Remortgagers

A base rate cut to 3.75% can affect borrowers differently depending on their position.

First-time buyers may watch whether fixed rates ease, as affordability calculations can be sensitive to both the pay rate used by lenders and the monthly payment at completion. However, rates are not guaranteed to fall and product availability can change quickly.

Remortgagers often focus on timing. Fixed mortgage pricing can move week to week as swap rates and lender pricing strategies shift. A lower base rate may support confidence, but it does not ensure cheaper fixed deals immediately.

Buy-to-let landlords may see changes in product pricing as funding costs move, but outcomes depend on lender criteria, rental coverage tests and portfolio strategy. Some buy-to-let borrowing is more sensitive to swap rates and competition than to base rate changes alone.

Across all borrower types, forecasts should be treated as uncertain. Markets can change direction quickly if inflation data surprises, geopolitical risks affect energy prices, or global bond yields rise.

Key Numbers Snapshot

• Bank of England Bank Rate: 3.75% (decision announced 18 December 2025)
• UK CPI inflation: 3.6% (12 months to October 2025)
• Indicative SONIA swap rates (as at 03/12/2025): 2-year 3.45%, 5-year 3.58%

Figures as of 22 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. Did the Bank of England cut the base rate to 3.75%?
Yes. The Monetary Policy Committee voted 5–4 to cut Bank Rate by 0.25 percentage points to 3.75% in December 2025.

2. Does the Bank of England base rate directly set fixed mortgage rates?
No. Fixed mortgage rates are influenced mainly by wholesale funding costs and swap rates, which reflect market expectations for future interest rates.

3. Why do global rate cuts matter for UK mortgage pricing?
Global rate moves can affect bond yields and market sentiment, which can feed into UK gilt yields and swap rates used to price fixed mortgages.

4. What is SONIA and why is it mentioned in mortgage pricing?
SONIA is a benchmark rate based on sterling overnight transactions and is widely used in UK wholesale markets.

5. Will mortgage rates definitely fall now Bank Rate is 3.75%?
Not necessarily. Fixed mortgage rates can change with swap rates, competition and wider market conditions, and may already reflect expected rate cuts.

6. What does a base rate cut mean for tracker mortgages?
Tracker mortgages usually move more directly with Bank Rate, subject to the product’s terms, lender margin and any rate floors.