Markets See Further Base Rate Cuts
as UK Labour Market Weakens

The UK mortgage market is increasingly factoring in the possibility of further reductions in the Bank of England Base Rate, driven by signs of weakness in the labour market and easing inflation pressures.

Your home may be repossessed if you do not keep up repayments on a mortgage or any other debt secured on it.

What Is Driving UK Mortgage Pricing

On 6 November 2025 the Bank of England held its Base Rate at 4 per cent but indicated that a gradual downward path remains plausible if inflation continues to move towards its target.
UK unemployment has risen to around 5 per cent – the highest level since early 2021 – while private-sector wage growth has slowed to roughly 4.2 per cent. These developments have strengthened market expectations of a rate cut, with futures pricing suggesting around 65 basis points of cuts by the end of 2026.
For borrowers, this means fixed and tracker mortgage pricing is now being set in an environment where expectations of lower interest rates are already built in. Lenders may adjust pricing in anticipation, though not always in direct step with Bank of England moves.

Bank of England and Swap Rates

The Monetary Policy Committee continues to balance two key risks: inflation remaining above target, and economic demand weakening, including the labour market’s performance.
Although the Base Rate remains at 4 per cent, the indication is that reductions are possible once inflation is sustainably under control.
In the mortgage funding market, swap rates used by lenders to hedge long-term borrowing have also eased, helping some fixed-rate mortgage offers reduce in recent weeks.

Key numbers:

• Bank of England Base Rate: 4.00 per cent (as at 6 Nov 2025)

• UK unemployment rate: approximately 5.0 per cent (three months to Sept 2025)

• Private-sector wage growth: 4.2 per cent (three months to Sept 2025)

As of 12 November 2025 London

What This Could Mean for Homeowners, First-Time Buyers and Remortgagers

For those in the market for a new mortgage:

• Fixed-rate deals may continue to ease, but much of the anticipated cut is already priced in. Opportunities may exist now rather than waiting for an official Base Rate change.

• Tracker and standard variable rate (SVR) borrowers may see a more direct benefit from a rate reduction, depending on when the Monetary Policy Committee confirms the next move.

• Remortgagers should prepare well before their current deal ends. Affordability and lender criteria remain central to any new application, regardless of potential rate cuts.

• Buy-to-let investors should remain mindful that fixed-rate products may not adjust immediately, and lending criteria vary by provider.

It remains essential to speak to a qualified mortgage adviser about your individual circumstances.

If you’d like to understand what today’s moves could mean for you, speak to Mortgage One. We can explain your options and timings based on your circumstances. www.mortgageonefinance.co.uk

The information provided in this article is for general guidance only and does not constitute personal or regulated financial advice. For tailored advice specific to your circumstances, please contact Mortgage One directly.

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

FAQs

1. When might the Bank of England cut the Base Rate?
While the rate is currently held at 4 per cent, recent labour and inflation data have increased the chances of a cut in December 2025 or early 2026.

2. Will a Base Rate cut automatically mean lower mortgage rates?
Not always. Fixed mortgage rates often reflect market expectations and funding costs ahead of time. Tracker or SVR deals are more directly sensitive to Base Rate movements.

3. Should I wait for a rate cut before fixing my mortgage?
Delaying in the hope of a cut can be risky: lenders may adjust pricing due to other pressures, and the timing of cuts remains uncertain. Early discussion with a qualified mortgage adviser is advisable.

4. How does labour market weakness affect mortgage affordability?
A weaker labour market can mean lower wages or job insecurity, which may reduce how much a lender is willing to advance based on income multiples.

5. Do Buy-to-Let mortgages benefit from Base Rate cuts in the same way?
Buy-to-let lending criteria and funding models differ, so changes in fixed-rate borrowing may not occur immediately after a Base Rate adjustment.