Slowing price growth offers potential relief for mortgage borrowers
UK inflation slowed sharply in November, increasing expectations that the Bank of England will cut the base rate at its meeting tomorrow.
Figures from the Office for National Statistics (ONS) show that annual consumer price inflation dropped to 3.2% last month, down from 3.6% in October and below market forecasts of 3.5%. On a monthly basis, the consumer prices index (CPI) fell by 0.2% in November 2025, compared with a 0.1% rise in November 2024.
“Inflation fell notably in November to its lowest annual rate since March,” said Grant Fitzner, ONS chief economist. “Lower food prices, which traditionally rise at this time of the year, were the main driver of the fall.”
The Consumer Prices Index (CPI) rose by 3.2% in the 12 months to November 2025, down from 3.6% in October 2025.
— Office for National Statistics (ONS) (@ONS) December 17, 2025
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The latest data arrive in a critical week for monetary policy and the wider economy. Softer inflation, weaker growth and rising unemployment have led many analysts to conclude that the central bank is likely to begin easing policy after an extended period of higher rates. Prior to the ONS release, financial markets were pricing in about a 90% chance of a 0.25 percentage point cut in the base rate.
For mortgage professionals, the inflation print will be viewed in the context of funding costs and the outlook for swap rates, which have already shifted lower on expectations of monetary easing. Any confirmed move by the Monetary Policy Committee (MPC) is likely to feed into pricing decisions for both new lending and refinancing over the coming months, even if pass-through is uneven across products and terms.
Industry bodies have stressed that, while the latest fall in inflation is welcome, the rate remains above the Bank’s 2% target and continues to play a key role in interest rate decisions.
“With the cost of living remaining at the forefront of people’s minds throughout 2025, today’s news may provide people with a degree of confidence that inflation is gradually trending in the right direction.” said Nathan Emerson, chief executive of Propertymark. “However, we still have some clear distance to go before inflation is back down at 2%, which, of course, is where the Bank of England has set its sights.
“In real terms, this metric remains extremely influential regarding base rate decisions for which we will see the Bank of England decide tomorrow afternoon. Any combination of inflation dropping and potential base rate cuts would always be welcome news for those on the property ladder, and even more so for people considering making their first steps to purchase a home.”
Others in the sector have linked the inflation data directly to calls for immediate action from the MPC.
“Falling inflation confirms the Monetary Policy Committee must cut the base rate tomorrow,” said Nick Hale, chief executive of home moving group Movera.
“The Budget announcement last month did very little to encourage home buying and selling. The Chancellor successfully made buy-to-let and higher value properties less attractive while offering nothing to first-time buyers looking to get a foothold on the property ladder.
“Given the Chancellor missed a trick with the budget, the sector really needs to see the base rate cut. If lenders can slash interest rates further, we might just be able to stimulate some momentum in the market, without having to rely solely on the 1.8 million due to refinance next year. UK Finance may have predicted earlier this week that it will be down to the remortgage wave to carry the property market through 2026, but that doesn’t have to be the case.”
Mortgage intermediaries will now focus on Thursday’s decision and the Bank’s accompanying guidance. The precise language on future moves, and any indication of how quickly inflation is expected to return to target, will also be closely watched by lenders setting fixed rate products and by advisers working with borrowers approaching refinancing or considering new purchases.
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