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The Bank of England has just announced that Bank Rate will be cut to 3.75%.
Here we’ll look more closely at their decision – and at what it means for the property market in 2026.
Phew. It’s been the trickiest year we can remember for predicting interest rate decisions.
Probably the trickiest since ex-Bank Governor and now Canadian PM Mark ‘Carnage’ Carney kept teasing us with rate rises that rarely materialised.
This month though, a Bank Rate (the official name for the interest rate) cut looked more likely. And that’s what happened.
In trying to understand why, most experts seem to agree that the UK economy is in definite need of a leg (or two) up at the moment.
The economy shrank again (by 0.1%) in October. Even its biggest fans didn’t forecast much growth.
Unemployment figures aren’t pleasant bedtime reading either. It has now reached 5.1% – the highest for four years.
The inflation rate doesn’t seem to have got the memo though.
Inflation dropped slightly to 3.2% last month. Thanks, say the ONS, due to a fall in the cost of cakes, biscuits and confectionery. But inflation is still waaay ahead of the Bank of England’s 2% target.
(The silver lining to this particular cloud has gone down very well in this office. We’re stocking up on the choccy digestives as we speak. But in the list of the world’s oddest oddball excuses that’s still a very odd one.)
In normal times this inflation rate would see the rate held or even raised not cut.
Rachel Reeves’ Budget in November wasn’t well received by business or the public either.
Chances are that helped to nudge the Bank of England towards making the decision they did, to give the economy a bit of support.
What all this might mean for the market in 2026
Most experts are predicting further falls in Bank Rate in 2026.
Goldman Sachs are the most optimistic. They’re forecasting rates could drop to 3% by next summer.
So the cost of taking a new mortgage (or remortgaging) is likely to fall in 2026.
But we talk to dozens of buyers, sellers and would-be movers every week.
They tell us that many things affect their moving plans – not just the interest rate and the cost of a new mortgage.
Out on the streets people are less likely to up sticks if they’re worried about their job and the cost of living.
Some good news, however, is that most experts are forecasting a steady and stable property market in 2026.
The Government’s OBR forecast national average house prices will rise 2.5% in 2026. Economic gurus Capital Economics agree with a 2.5-3.0% forecast.
Stable house prices and falling mortgage costs?
That could actually turn 2026 into a good time to make your moving plans.
So what do we think?
As you know, we like to play it straight.
Yes we’re here to sell houses. But we think that the doom and gloom in the economy might make the market a bit chilly over the next few weeks.
Although, in line with the weather, that’s not unusual at this time of year.
However, come the spring, all that could change.
Assuming mortgage costs drop further, the economy turns a corner, and if house prices continue to look good value then moving could be back on many people’s agenda once again.
Whatever happens we’ll keep you updated with the latest market forecasts here.
Have a great Christmas break and a very happy new year.
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