- The Bank of England is widely predicted to cut interest rates at its next Monetary Policy Committee meeting on 18 December 2025, with markets pricing in an 85% chance of a quarter-point reduction from 4% to 3.75%.
- On 9 December, early analysis published by the Bank of England suggests the Autumn Budget will reduce the UK’s headline inflation rate by as much as half a percentage point next year.
- Clare Lombardelli, a member of the Bank’s MPC, said the central bank would take into account the budget measures, but cautioned that longer-term inflation prospects would be important to take into account, amid business leaders warning that higher employment costs could force them to push up prices.
“This is new information the committee will consider,” Lombardelli said of the budget. “[We need to consider] how much are you affected by one-off, one-year short-term impact of inflation.”
- And following official figures released on 12 December by the Office for National Statistics, which showed the economy shrunk by 0.1% in October, a cut on Thursday is ‘nailed on’, experts say.
- The central bank held interest rates at 4% at its most recent MPC meeting on 6 November, as it continued to tread carefully amid fears of resurgent inflation. The vote was split 5-4 in favour of a hold, with four members voting to cut interest rates to 3.75%, as policymakers said inflation has peaked.
Speaking on 6 November, Andrew Bailey, Governor of the Bank of England, said: “We held interest rates at 4% today. We still think rates are on a gradual path downwards, but we need to be sure that inflation is on track to return to our 2% target before we cut them again.”
- It was the second time in a row that interest rates were held by the bank. In August, it cut interest rates from 4.25% to 4%, down from a high of 5.25% the previous year.
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Will the Bank of England cut interest rates on 18 December?
The Bank of England is considered highly likely to cut interest rates from 4% to 3.75% on 18 December 2025, with markets pricing the odds at around an 85% chance.
Interest rate predictions
Looking at December’s decision and further ahead into 2026 in more detail, here’s a selection of interest rate forecasts:
- Money markets are predicting a December cut, plus two interest rate cuts in 2026 with the possibility of a third.
- A majority of economists in a Reuters poll predict the Bank of England will cut interest rates in December and again early next year as inflation cools over coming months. When this poll was taken last month, a small majority expected borrowing costs to remain unchanged for the remainder of this year.
- Ruth Gregory, deputy chief UK economist at Capital Economics, said: “The surprise 0.1% m/m contraction in the economy in October was especially disappointing given the increase in manufacturing output, which rebounded after September’s cyber-attack induced hit, and is a further reason to expect the Bank of England to cut interest rates next Thursday.”
- Suren Thiru, economics director at the ICAEW, said: “The aftereffects from the Budget may mean that the UK’s economic prospects are poorer over the near term, with the growing tax burden and a weakening jobs market likely to keep growth notably lower than the OBR expects.
“With these downbeat figures likely to further fuel fears among rate-setters over the health of the UK economy, a December policy loosening looks nailed on, particularly given the likely deflationary impact of the Budget.”
- Goldman Sachs expects the Bank of England to cut interest rates on Thursday, forecasting a 6-3 vote in favour of easing policy.
- Philip Shaw, of Investec Economics, predicts Bank of England Governor Andrew Bailey will switch his vote to a base rate reduction at Thursday’s meeting, “resulting in another narrow majority, this time for a cut.”
- Pantheon Macroeconomics said a rate cut in December is still “nailed on” following the Budget but if inflation rises again next year, the Bank could implement rate cuts more slowly.
- Laura Suter, director of personal finance at AJ Bell, says a drop to 3.75% in December seems “already wrapped up” after four committee members voted for it last time.
- HSBC’s interest rate prediction is that the base rate will fall to 3% by the end of 2026.
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Latest Bank of England base rate news
The Bank of England held interest rates in November at 4%, with five MPC members voting for a hold, while four favoured a cut. Both the decision to hold rates and the fact it was a narrow vote were widely predicted, amid lower-than-expected inflation figures and concerns that Budget tax rises could harm growth.
The most recent interest rate cut was on 7 August, when the bank cut interest rates from 4.25% to 4%, which was then the fifth interest rate cut in a year. The decision was narrowly passed by a 5–4 split vote, with one member initially pushing for a larger 0.5 percentage‑point reduction. The result was a much closer call than predicted.
That move followed cuts in May 2025, February 2025, November 2024 and August 2024, when the base rate was first cut from 5.25%.
What are interest rates and why do they change?
- The Bank of England’s base rate acts as a benchmark for the cost of borrowing money. As a general rule, when interest rates increase, so does the cost of borrowing on mortgages and other types of borrowing.
- One major reason why the Bank moves rates up and down is to help control inflation. When inflation is high, the bank may increase interest rates to try to bring it down by encouraging people to spend less and reduce demand. And once inflation is at or near its target, the Bank may hold or cut interest rates.
- However, the Bank’s Monetary Policy Committee will assess a range of factors when deciding whether to cut interest rates including job and wages data and external factors that can impact the economy.
What’s happening with inflation?
- Official government figures released in November 2025 showed that CPI inflation in October fell to 3.6%. This is down from September’s figure of 3.8%, which was lower than the 4% expected by the Bank of England and economists polled by Reuters.
- CPIH, which includes owner‑occupiers’ housing costs, stood at 3.8%, while RPI inflation came in at 4.3%, underscoring persistent pressures across housing and consumer prices. All of this leaves inflation running at almost double the Bank of England’s 2% target.
- The OBR said in its economic and fiscal outlook for November 2025 that it expects consumer price index (CPI) inflation to average 3.5% in 2025, up from its forecast of 3.2% in March.
- It then expects CPI inflation to average 2.5% in 2026 – higher than its previous forecast of 2.1% – but anticipates it to fall to an average of 2% in 2027.
When is the Bank of England’s Monetary Policy Committee’s next meeting?
The next Bank of England Monetary Policy Committee meeting is on 18 December 2025. Its subsequent meetings are on 5 February 2026, 19 March 2026 and 30 April 2026. The Bank of England publishes a calendar of future committee meeting dates here.
How do interest rates affect mortgages, loans and savings rates
How changes in interest rates affect your mortgage
Falling interest rates usually means mortgage rates fall too. Stay up to date with our guide to Mortgage rate predictions.
However, how changes in interest rates affect your mortgage depends on your circumstances:
- You’re taking out a new mortgage: If you’re shopping around for a new mortgage or want to remortgage, the mortgage rates available should improve if interest rates fall, although this isn’t guaranteed. So make sure you shop around. For the cheapest mortgage rates read our guide to the Best mortgage rates.
- If you’re on a fixed rate mortgage the amount you’ll pay on your monthly mortgage payments will stay the same during your initial term – usually 2 or 5 years. So your mortgage payments won’t change if interest rates go up or down.
- You have a tracker mortgage: If you’re one of the estimated 600,000 households on a tracker mortgage deal and interest rates are cut, your mortgage payments will fall as the rate you pay on your mortgage rises and falls in line with the Bank of England base rate.
- If you’re on a discounted variable rate, you’ll pay a rate that’s lower than the lender’s Standard Variable Rate. If your lender decides to pass on the cut in interest rates, your mortgage payments will fall. But it won’t necessarily pass on all or any of the cut.
- You’re on your lender’s Standard variable rate (SVR): According to UK Finance, there are around 1.1 million households on their lender’s standard variable rate. If this includes you and your lender decides to reduce its SVR if interest rates fall, the amount you’ll pay will fall. But the lender may not pass on all or any of an interest rate cut. Lenders’ SVRs can be extremely expensive, so check your deal now to see if you can save by remortgaging.
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Interest rate changes’ impact on credit cards and loans
Other types of borrowing are affected in a similar way. If interest rates go up, borrowing of any type generally gets more expensive, while when interest rates are cut, borrowing generally gets cheaper. However, this is in general terms as the amount you’ll pay on things like credit cards and loans will depend on a number of factors including your credit history.
November 24, 2025 
