December 18th, 2025
The Bank of England has today cut the UK base rate from 4.00% to 3.75%, marking the fourth rate cut this year as inflation continues to ease.
This decision brings interest rates to their lowest level in almost three years and reflects improving economic conditions, including slowing inflation and weaker recent economic data. For contractors, this is a positive signal that borrowing costs may continue to gradually improve.
How Could This Affect You?
Lower interest rates can help improve mortgage affordability, but the impact depends on the type of mortgage you’re on.
On a tracker or variable rate?
You may see your monthly payments reduce, depending on how quickly your lender passes on the cut.
On a fixed-rate mortgage?
Your payments won’t change immediately, but when your current deal ends, you could benefit from better rates than those available earlier in the year.
Planning a purchase or remortgage?
Many lenders had already anticipated this rate cut, meaning mortgage rates have been easing in recent weeks. Contractors with strong contract history and income structure may find more competitive options becoming available.
What Does This Mean for the Mortgage Market?
While base rate changes don’t affect mortgages overnight, lenders price new deals based on future expectations. As a result, today’s cut could encourage further reductions in mortgage rates over the coming weeks.
With a large number of borrowers expected to come off fixed-rate deals over the next couple of years, this shift may provide welcome relief for those reviewing their mortgage options.
Is Now a Good Time to Act?
A lower base rate can create opportunity, but the right mortgage still depends on factors such as:
- How lenders assess your contract income
- Your contract length and work history
- Your deposit size and future plans
This is where specialist advice matters.
CMME works with lenders who understand how contractors are paid and assessed. If you’re thinking about buying, remortgaging, or simply want to understand what today’s rate cut to 3.75% means for you, speaking to an adviser now could help you plan your next move with confidence.