The Bank of England’s decision to reduce the base rate to 3.75% marks an important moment for the UK property market. After a prolonged period of higher borrowing costs and cautious decision-making, this move suggests financial pressures may be starting to ease and provides useful insight into how the housing market could develop through 2026.
While a 0.25% reduction may seem modest, base rate changes often influence confidence and behaviour before they significantly affect headline figures. For buyers, homeowners and landlords, this shift is less about instant savings and more about planning, reassessing options and positioning for the next phase of the market.
Related: Understanding the 2025 Budget
Why the base rate matters
The Bank of England base rate affects how much it costs lenders to borrow money, which in turn influences several key areas of the economy, including:
- Mortgage interest rates
- How much buyers can borrow
- Returns on savings
- Confidence across the housing market
When the base rate begins to fall, lenders typically adjust mortgage products over time. As borrowing becomes more affordable, buyers who have been waiting on the sidelines often feel more comfortable taking the next step.
This latest cut is widely viewed as a sign that inflationary pressures are easing and that the Bank of England may be moving away from a more restrictive approach to monetary policy.
What mortgage holders should consider
For those with a mortgage, the impact of a base rate cut will depend on the type of deal you’re on.
- Tracker and variable-rate mortgages
Mortgage holders on tracker or variable-rate deals are usually the first to feel a change, with a small reduction in monthly repayments that can help ease household budgets. - The longer-term picture
While the immediate savings may be limited, further rate reductions could make a more noticeable difference over time, particularly if cuts continue into 2026. - Fixed-rate mortgages
If you’re on a fixed-rate deal, your payments won’t change straight away. However, new fixed-rate products may become more competitive as lenders begin to price in a lower-rate environment.
If your fixed term is ending within the next year, reviewing your remortgage options early can help you secure a more favourable deal and avoid rushed decisions later on.
Related: Mortgage FAQs
What does this mean for the buyer
Lower borrowing costs can improve affordability and make monthly repayments more manageable, particularly for first-time buyers. As confidence returns, lenders may compete more actively, offering a wider choice of products and more attractive terms.
Rather than triggering a sudden surge in activity, this points towards a steadier and more balanced market in 2026, where buyers feel able to move forward without the pressure seen in previous cycles.
Tip: Having your deposit, credit profile, mortgage advice and budget prepared early gives you greater flexibility when the right property becomes available.
What this means for sellers
As borrowing becomes more affordable and confidence improves, buyer demand typically strengthens. This doesn’t always result in a rapid increase in prices, but it often leads to more consistent enquiries and smoother transactions.
Heading into 2026, the base rate cut could help support transaction volumes and reduce hesitation from buyers who have been waiting for clearer signals.
For sellers, this may feel closer to a traditional market. Buyers remain price-conscious, accurate valuations are essential, and well-presented homes tend to perform best. If you’re planning to sell in 2026, preparing early, including understanding local demand and planning your onward move, can put you in a stronger position.
What this means for landlords and buy-to-let investors
Landlords have faced sustained pressure from higher finance costs alongside wider changes in the rental sector, so a base rate cut may offer some welcome relief, particularly for those on tracker mortgages or refinancing soon.
If borrowing costs continue to ease into early 2026, this could support improved cash flow, more competitive remortgage options and clearer long-term planning.
Rental demand remains strong in many areas, with supply still limited. This ongoing imbalance continues to underpin the rental market, even as the sales market adjusts.
Related: New Possession Rules from May 2026: What Landlords Need to Know
What the market could look like in 2026
Some economists expect further base rate cuts during 2026, although the pace will depend on inflation and wider economic conditions. A gradual reduction in borrowing costs could lead to more stable mortgage pricing, improved confidence and a calmer, more predictable property market.
Rather than sharp movements, the outlook suggests measured growth and steady activity, giving buyers, sellers and landlords more certainty when making decisions.
Key takeaway: Whether you’re buying, selling, remortgaging in the next six to 12 months, or reviewing a buy-to-let strategy, starting early gives you more choice, more time to compare options and a stronger position when you’re ready to act.
Why this base rate cut matters
This base rate cut is significant not because it changes the market overnight, but because it marks a shift in direction. It gives buyers, homeowners and landlords the confidence to start planning, reviewing finances and making informed decisions as the market moves into its next phase.
Property decisions are always local, and outcomes depend on timing, finances and regional demand. Your local Ellis & Co team can help you understand buyer interest, rental trends and realistic pricing, and guide you through your next steps with clarity.
Thinking ahead to 2026? Book a free property valuation with Ellis & Co to understand what your home could achieve in today’s market and how best to position it for the year ahead.
