In a significant pre-Christmas announcement, Nationwide Building Society has confirmed it will pass on the latest Bank of England interest rate cut to hundreds of thousands of its mortgage customers.
Rate Reduction Details for Homeowners
The move comes directly after the Bank of England's Monetary Policy Committee (MPC) voted to reduce the base rate by a quarter of a percentage point, from 4% to 3.75%, on Thursday 18 December. Nationwide has stated that its Standard Mortgage Rate (SMR) will decrease by the same 0.25%, falling to a new rate of 6.49%.
This change is effective from 1 January 2026, offering a financial boost at the start of the new year. Furthermore, existing customers with tracker mortgages, which automatically follow the Bank Rate, will also see their rates adjusted downwards from the same date.
Bank of England's "Closer Call" on Future Cuts
The decision by the Bank's nine-member committee was not unanimous, passing by a narrow margin of five votes to four. This split highlights ongoing concerns within the Bank about the persistence of inflation despite recent declines.
Governor Andrew Bailey acknowledged the economy had "passed the recent peak in inflation" but signalled caution ahead. "We still think rates are on a gradual path downward. But with every cut we make, how much further we go becomes a closer call," he stated.
Adding to the cautious tone, Chief Economist Clare Lombardelli pointed to "elevated wage growth" as a factor that might necessitate slowing the pace of future rate reductions. Three MPC members, including Bailey, Sarah Breeden, and Dave Ramsden, supported the cut believing upside risks to inflation had continued to fade.
Political and Economic Reaction
Responding to the Bank's decision, Labour Chancellor Rachel Reeves welcomed the move. "This is the sixth interest rate cut since the election – that’s the fastest pace of cuts in 17 years, good news for families with mortgages and businesses with loans," she said.
However, Reeves also stressed that the government recognised ongoing pressures, adding, "I know there’s more to do to help families with the cost of living." The rate cut is viewed as a timely intervention aimed at providing relief to a UK economy that continues to face significant challenges.
