The mortgage market has welcomed the “festive cheer” of the Bank of England’s widely-expected decision to cut bank rate today.

The Bank of England’s Monetary Policy Committee (MPC) voted to cut bank rate by 25bps to 3.75%.

The bank rate was held at 4% in September and November after being cut from 4.25% to 4% in the August MPC meeting.

The cut is the fourth this year, with the MPC making reductions in February, May and August.

Bank of England governor Andrew Bailey said the MPC voted 5-4 for the cut. The decision to trim bank rate was eventually swayed by inflation falling.

Bailey said bank rate is likely to fall “gradually”, depending on factors such as pay growth and services inflation.

SPF Private Clients chief executive Mark Harris said: “A cut in base rate was a dead cert after the recent inflation figures, which while still above the Bank’s 2% target, are moving in the right direction.

“This news will add to the festive cheer borrowers are already experiencing with lenders cutting mortgage rates, keen to attract business and get 2026 off to a strong start.

“With some lenders repricing on a weekly basis, it is now possible to access a short-term fix at just over 3.5%. Given how relatively quiet activity is with the usual pre-Christmas lull, we would expect to see rates dip below that level in late December or early January. It might take a little longer for five-year fixes to breach the 3.5% barrier but it could happen in the new year, with rates currently at just over 3.7%.”

The bank rate cut gives confidence to the mortgage market as it heads towards 2026, according to Mortgage Advice Bureau deputy chief executive Ben Thompson.

Thompson said: “Whether you’ve been eyeing up your first home or are desperate to move up the ladder, there’s a high chance you’ve been stuck watching from the sidelines waiting for rates to settle down. However, the market has already priced in this stability, and mortgage rates have already been on a gradual downward trend over recent months.”

MT Finance director of mortgages Marylen Edwards said: “Today’s decision by the MPC to cut rates will be welcomed by borrowers. After interest rates were cut by the US Federal Reserve last week, it seemed inevitable that the Bank of England would follow suit, particularly after inflation fell in November.

“We are hopeful that this move will instil some confidence into the market, and we will start to see more landlords, as well as owner-occupiers, transact in the New Year.”

The cut to bank rate will also be welcomed by landlords, even if it comes as no surprise, according to Fleet Mortgages chief commercial officer Steve Cox.

Cox said: “In many ways, a number of lenders have been ahead of this particular curve having been actively pricing it into products. We’ve seen a flurry of mortgage rate cuts across the residential and buy-to-let sectors over the last week or so perhaps in anticipation of this decision and in an attempt to grow volume and pipeline as we move into 2026.

“In the buy-to-let space, product pricing continues to improve, supported not just by this rate change, but by swaps which are increasingly aligned with the view that further cuts could follow into 2026.

“For landlords, this is a positive way to end the year, and a promising start to 2026.”