Base rate decision set to shape early-2026 mortgage demand and affordability
With the Bank of England due to announce its latest decision today, industry figures are increasingly expecting another cut in the base rate and a further easing in mortgage costs.
Expectations have strengthened following the latest inflation data, published this morning, which showed price growth slowing more than anticipated to 3.2% in the year to November. This has added to speculation that the Monetary Policy Committee (MPC) will move again on rates at its upcoming meeting and potentially consider more reductions in early 2026.
Nathan Emerson (pictured top, far left), chief executive of trade body Propertymark, One senior industry body said a cut now would give the Bank more room to support households and the housing market. “With inflation continuing to ease, there is growing optimism that the Bank of England will have the confidence to cut the base rate,” he said. “Any reduction would provide a welcome boost to housing market confidence, improving affordability for buyers and offering relief to those approaching the end of fixed-rate mortgage deals.
“Lower borrowing costs would help stimulate activity, encourage more first-time buyers to take their first step onto the property ladder, and give existing homeowners greater confidence to move. While caution remains important, a shift towards lower interest rates would send a positive signal for both the housing market and the wider economy as we head into 2026.”
Emerson’s comments reflect a broader view among agents and brokers that even modest reductions in the base rate can have a clear psychological effect on buyers and sellers, particularly those considering moving in the first half of next year.
Jason Tebb (pictured top, second from left), president of property portal OnTheMarket, also highlighted the importance of a Bank of England cut for the housing market. “The five base-rate reductions in the past 17 months have given a real boost to buyer and seller confidence and activity, although affordability remains a challenge and is keeping property prices in check to a degree, along with the increase in stock,” he said.
For mortgage brokers and their clients, the focus now is on how far any new cut filters through into product pricing and how long lenders take to reprice. In London, some firms report that expectations of cheaper borrowing are already feeding into the market.
“A 25 basis point cut from the Bank of England this Thursday now looks almost nailed on, with markets also pricing in the possibility of a further cut early next year,” said Amy Reynolds (pictured top, second from right), head of sales at estate agency Antony Roberts.
“That brings us closer to the widely-anticipated neutral rate of around 3 to 3.5%. For London buyers, this is already feeding through to more competitive mortgage pricing and renewed confidence, which should underpin transaction volumes and support modest price growth, rather than a sharp rebound or further correction.”
Elsewhere, estate agents suggest that a rate reduction this week would be enough to trigger more decisive moves from buyers who have been waiting for improved affordability and greater certainty.
“For buyers, it is likely the Bank of England will reduce interest rates this week and fuel competitive mortgage offers, giving some more leverage and impetus to make their move in January,” said Nick Leeming (pictured top, far right), chairman at national estate agency Jackson-Stops.
“This is the window buyers have been waiting for – choice, leverage, and stability finally back on their side. Already in the first few weeks of December, we have seen a sharp uptick in offers and exchanges, with a continued surge in activity expected in the first quarter of the year.”
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