January 2026: base rate cut to 3.75% and planning a 2026 move

January is traditionally one of the busiest months for enquiries, as buyers set plans in motion for the year ahead.

Base rate reduced to 3.75%

On 18 December 2025, the Bank of England cut the base rate from 4% to 3.75%, reinforcing the view that inflation pressures are easing and that the direction of travel for rates remains downward.

What this means for you:

• Mortgage lenders had already begun reducing fixed rates in anticipation of a cut
• Since the announcement, competition between lenders has increased further
• More reductions are expected gradually if economic conditions continue to improve

While the base rate does not directly control fixed mortgage rates, it strongly influences lender confidence and pricing. The direction of travel is now clearly more positive than it was this time last year.

The Budget: what we're seeing in practice

Several weeks on from the Autumn Budget, the immediate impact on day to day mortgage activity has been limited, which is largely positive news. Here's what's becoming clearer:

• Stamp duty remaining unchanged has provided certainty for buyers and movers, helping transactions progress without hesitation.
• Landlord tax changes planned for 2027 are already influencing some longer term decisions, with a small number of landlords reviewing portfolios or considering selling, which could gradually increase choice for buyers.
• No new first time buyer schemes means preparation and planning remain crucial, particularly as competition is likely to increase once confidence returns.
• Lender behaviour has stayed supportive, with affordability models largely unchanged and pricing continuing to improve alongside the wider economic outlook.

Overall, the Budget has reinforced a sense of stability rather than disruption, which allows for clearer planning and more confident decisions heading into 2026.

Thinking about buying in 2026?

If buying a home is one of your goals this year, now is the right time to start preparing. The buyers who succeed will be those who plan early rather than waiting for the market to heat up.

1. Speak to a mortgage adviser early. A conversation now helps you understand what you can realistically borrow, plan your next steps, and avoid surprises later in the year.

2. Get a Mortgage in Principle. It shows estate agents and sellers that you are proceedable and serious. In competitive situations, this can make a real difference.

3. Get your documents ready early. This is especially important if you are self employed.

• P60 and payslips if employed
• SA302s and Tax Year Overviews if self employed
• Latest accounts if you run a limited company
• Bank statements and clear evidence of deposit funds

Having these ready can save weeks when the right property comes along.