The central bank’s Monetary Policy Committee (MPC) voted five to four in favour of the cut, citing yesterday’s inflation drop to 3.2% as a key driver for the decision.

The MPC added: “Although above the 2% target, it is now expected to fall back towards the target more quickly in the near term.”

The news has been welcomed by the property industry, given the last MPC meeting — when it was decided to maintain rates at 4% — came before the Autumn Budget and a time of uncertainty.

“This news will be welcomed by borrowers, particularly those due to remortgage in the coming year, who will be hoping that the rate shock will not quite be as exaggerated as it otherwise might have been,” said Jason Tebb, president of OnTheMarket.

“With the Budget now out of the way, the atmosphere of uncertainty has lifted and this rate cut delivers a real pre-Christmas boost for the housing market which bodes well for activity in the new year.”

Paresh Raja, CEO at Market Financial Solutions, also welcomed the news and said the rate cut was what “so many were hoping for” given the recent stalling of activity in October and November.

“Yes, the market will slow over the festive period, but once we're into the new year, we should expect to see greater confidence and demand among property investors and homebuyers,” added Paresh.

“Lenders must be ready to support brokers and borrowers as activity accelerates — in doing so, we can lay the foundations for a robust and growing property market in 2026.”

"The encouraging news is that the housing market has been relatively resilient despite many concerns about the contents of the Budget, which turned out not to be as bad as anticipated,” added Jeremy Leaf, North London estate agent and former RICS residential chair.

“We don’t expect fireworks after the new year but now interest rates are a little lower, we do expect a gradual improvement with property price increases tempered by continuing concerns about the economy and the amount of choice available.”

In particular, some see this being of particular support to landlords, given the upheaval of the Renters Rights Act this year.

Steve Cox, CCO at Fleet Mortgages, described the cut as a “positive way” to end 2026 for landlords.

“With the Renters’ Rights Act coming into force next year, any opportunity to reduce monthly mortgage costs will be welcomed,” said Steve.

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“Landlords coming to the end of two-year deals in particular will find a much more competitive rate environment than they did in 2023 or early 2024, and this should support renewed purchase and refinance activity in the months ahead.”

However, some still point to the unpredictable and sticky nature of inflation, with the MPC vote split on what to do with rates.

“Although today’s cut to the Base Rate was not a surprise, it could easily have gone the other way with interest rates left unchanged,” said Charles Resnick, chief finance officer at Afin Bank.

“Mortgage lenders are expected to remain disciplined, reflecting ongoing uncertainty around the pace of further cuts given the MPC’s emphasis on a cautious, data-dependent easing cycle.”

Nick Smith, group managing director at Reward Funding commented: "The Bank of England’s decision to cut the base rate to 3.75% will offer a sigh of relief to businesses as we close the year. But does it support SMEs enough?

“The financial system inches forward incredibly slowly, and ambition shouldn’t have to wait for these types of announcements and businesses often want to move forward much faster. The cut is a small glimmer of hope in today’s struggling economy, but the pace of ambition we see every day far outpaces the traditional financial system.”

Matt Harrison, customer success director at Finova Broker, said: “Affordability looks set to be a big issue for borrowers remortgaging in the next 12 months. Although interest rates are generally below 5%, they are far higher now than they were when many borrowers entered their current fixed-rate mortgage deals.

“Today’s cut should go some way to ease that affordability pressure and generate even more competition between lenders to offer the best rates. With so many mortgages due to mature next year there are plenty of deals to be had – lenders should prioritise affordability and trust that further cuts to the base rate will follow in the new year.”

Jonathan Samuels, CEO at Octane Capital, commented: “The Bank of England’s decision to cut the base rate is a welcome step and one that should help reinforce confidence across the wider economy.

“With inflation having stabilised in recent months, this move provides some much-needed relief for households and businesses alike, helping to ease pressure on borrowing costs and support spending and investment decisions.

"While the reduction itself is modest, it sends an important signal that monetary policy is beginning to shift in a more supportive direction and, for the property sector, this cut should help build on the stability we have seen throughout the year.”