Bank of England Interest Rate Update – December 2025: What It Really Means for Mortgage Rates

In its latest update, the Bank of England has shifted the tone slightly. The main concern now is the risk of the UK economy slowing too much, rather than inflation staying stubbornly high. With inflation continuing to cool, the door is open for further gradual interest rate cuts, while the long-term goal of returning inflation to 2% remains unchanged.

What does this mean in the real world? At Home Sorted, we’re already seeing lenders adjust their pricing, with some mortgage rates becoming noticeably more competitive compared to earlier in the year.

How Falling Interest Rates Usually Affect Tracker Mortgages

Tracker mortgages are linked to the Bank of England base rate. When the base rate falls, tracker rates typically reduce as well, meaning lower monthly payments — often without you needing to do anything.

When rates are on a downward path, tracker mortgages can:

• Reduce your payments automatically

• Allow you to benefit from multiple rate cuts

• Offer flexibility, often with smaller or no early repayment charges

However, trackers are still variable. If rates were to rise again in the future, payments would increase too. They tend to suit borrowers who are comfortable with some movement in their monthly costs.

Tracker Rates vs Fixed Rates – A Simple Comparison

Tracker Rates

• Usually react quickly when rates go down

• Can be cheaper in the short term

• Less predictable month to month

  
  

Fixed Rates

• Your payment stays the same for the fixed period

• Easier for budgeting and peace of mind

• You won’t benefit from future rate cuts until the deal ends

  
  

Right now, with expectations leaning towards slow and steady rate reductions, some buyers and remortgagers are choosing trackers or shorter fixed deals to keep flexibility. Others still prefer a longer fix for certainty — especially households managing tight monthly budgets.

Is Now a Good Time to Buy or Remortgage?

If you’re:

• Coming off a higher fixed rate

• Thinking about buying your first home

• Unsure whether to fix or track

• Self-employed or dealing with a more complex situation

…it’s worth reviewing your options sooner rather than later.

At Home Sorted, we look across the whole market, answer any questions you may have and help you choose a mortgage that actually fits your plans — not just today, but over the next few years too.

If you’re considering buying or remortgaging, feel free to get in touch and we’ll talk it through.