NEWS·DECEMBER 2025
The Bank of England's Monetary Policy Committee has cut Bank Rate to 3.75%, the sixth reduction from the 5.25% peak and the lowest level in almost three years.
The decision, taken at the final meeting of 2025, reflects steadily easing inflation and a labour market that has cooled without cracking. Markets had priced the move, but the confirmation matters for sentiment as the year closes.
Every basis point feeds through to the three numbers that drive our market: the cost of debt, the yield investors will accept, and the viability of development.
For investors, 3.75% continues the slow normalisation of the rate environment that stalled transactions through 2023 and 2024. Prime yields no longer need to reprice outward, and the bid ask gap that defined the last two years is closing. December's landmark City office trades show capital already moving.
For developers and housebuilders, lower rates improve scheme viability at the margin and support buyer affordability into the spring market. Combined with the planning reforms that reached the statute book this week, the direction of travel on supply is finally constructive.
The Bank signalled that further cuts will be gradual, and the pace of easing from here depends on wage growth and services inflation. Our base case is a rate settling around 3.25% to 3.5% during 2026, a level consistent with a genuine, if measured, recovery in investment and transaction volumes.
NEWS·DECEMBER 2025
The Bank of England's Monetary Policy Committee has cut Bank Rate to 3.75%, the sixth reduction from the 5.25% peak and the lowest level in almost three years.
The decision, taken at the final meeting of 2025, reflects steadily easing inflation and a labour market that has cooled without cracking. Markets had priced the move, but the confirmation matters for sentiment as the year closes.
Every basis point feeds through to the three numbers that drive our market: the cost of debt, the yield investors will accept, and the viability of development.
For investors, 3.75% continues the slow normalisation of the rate environment that stalled transactions through 2023 and 2024. Prime yields no longer need to reprice outward, and the bid ask gap that defined the last two years is closing. December's landmark City office trades show capital already moving.
For developers and housebuilders, lower rates improve scheme viability at the margin and support buyer affordability into the spring market. Combined with the planning reforms that reached the statute book this week, the direction of travel on supply is finally constructive.
The Bank signalled that further cuts will be gradual, and the pace of easing from here depends on wage growth and services inflation. Our base case is a rate settling around 3.25% to 3.5% during 2026, a level consistent with a genuine, if measured, recovery in investment and transaction volumes.