- The Bank of England is considered likely to cut interest rates at its next Monetary Policy Committee meeting on 18 December, with investors seeing a 60% chance of a reduction, according to Reuters.
- Inflation figures published on 19 November showed a fall in inflation in October 2025 to 3.6%, which has further raised hopes of an interest rate cut in December.
- At its most recent MPC meeting on 6 November, the Bank of England held the base rate at 4%. But the decision was far from clear cut: the vote was split 5-4 in favour of a hold, with four members voting to cut interest rates to 3.75%, as policymakers insisted inflation has peaked.
- The vote split “signals the bar for a cut in December isn’t high”, said Francesco Pesole, an FX strategist at ING.
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.”
- These comments were interpreted as signalling that the bank could lower borrowing costs at its next meeting on 18 December after it has received more information on inflation and the labour market and obtained clarity on tax and spending changes at this month’s Budget.
- However, Bank of England Chief Economist Huw Pill said not too much should be read into a shift in language in November’s Monetary Policy Report and that the bank’s rate decisions were finely balanced, Reuters reports.
- He said MPC policymakers were divided into one group who viewed slower business activity and falling employment as likely to push inflation below target over the medium term, while another group was more concerned that inflation and wage growth hadn’t yet slowed that much despite a weaker economy.
“If you look at the vote which was a 5-4 vote on this occasion to hold Bank Rate, I think that says that the balancing of those two risks is quite finely balanced at the moment,” he said.
- A further interest rate cut in 2025 had been all but ruled out. However, there has been an about-turn in recent weeks, in part due to the better-than-expected inflation figures released in October.
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Will the Bank of England cut interest rates on 18 December?
The Bank of England is considered likely to cut interest rates to 3.75% on 18 December, with markets pricing the odds at around a 60% chance.
Interest rate predictions
Looking at December’s decision and further ahead into 2026, here’s a selection of interest rates forecasts:
- Capital Economics says: “We’re expecting the next cut in February, but December is possible. Either way, we still expect Bank Rate to fall to 3.00% next year rather than to the 3.25-3.50% priced into markets.”
- Bestinvest‘s Alice Haine says that stubborn inflation might make the Bank think twice about a December cut. “February may be the most likely point for a rate cut, though December cannot be ruled out if upcoming data turns sharply negative,” she said.
- Laura Suter, director of personal finance at AJ Bell, is more optimistic, suggesting a drop to 3.75% in December seems “already wrapped up” after four committee members voted for it last time.
- KPMG‘s Yael Selfin says despite the November decision to hold rates, “the narrow vote split and the more dovish tone in the minutes suggests the door remains open for a rate cut at the December meeting. Key data releases on inflation and the labour market, in addition to more clarity on fiscal policy following the Budget, will likely be enough to persuade a majority of MPC members to vote for a rate cut. We expect base rates to fall to 3.75% by the end of the year.”
- HSBC’s interest rate prediction is that the base rate will fall to 3% by the end of 2026.
- 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.
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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 show 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.
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, if 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 
