Bank of England Interest Rates: Where We Are Now – and What Happens Next

The Bank of England is at a turning point. After two years of aggressive rate hikes to fight inflation, we’re now in the “holding pattern” phase – with markets debating when the first proper cuts will arrive, and how fast they’ll go.

For anyone involved in UK property – landlords, homebuyers, and investors using platforms like Fractional Keys – the next few decisions from the Bank will heavily shape mortgage costs, yields and capital values.

This article breaks down:

• Where interest rates and inflation stand today

• How the Bank of England is thinking about its next move

• Different scenarios for what happens if inflation falls faster, drifts slowly, or gets stuck

• What this all means for the property market – and for Fractional Keys investors

1. Where are interest rates now?

As of November 2025, the Bank of England’s Bank Rate is 4.0%.

Key milestones in this cycle: 

• Peak rate: 5.25% in August 2023

• First cut: to 5.0% in August 2024

• Subsequent cuts through 2025, most recently to 4.0% on 7 August 2025

• The November 2025 MPC meeting voted 5–4 to hold at 4% – with four members already voting for another cut to 3.75%

That very close vote tells you a lot: the Bank is on the edge of beginning a cutting cycle, but still worried about cutting too early.

2. Inflation: still above target, but heading the right way

The Bank’s job is to get inflation back to its 2% target and keep it there. Right now, we’re not there yet – but we’re moving in the right direction.

According to the ONS: 

• CPI inflation was 3.6% in the 12 months to October 2025, down from 3.8% in September.

• CPIH (includes housing costs) was 3.8%, down from 4.1%.

• Inflation has generally been easing, but remains clearly above 2%.

The Bank’s November 2025 Monetary Policy Report notes: 

• Underlying price pressures (especially in services) have started to cool.

• Wage growth is slowing, and business surveys point to further easing.

• Economic growth is subdued and slack is building in the labour market.

The OBR’s latest forecast suggests: 

• Inflation averaging about 3.5% in 2025,

• 2.5% in 2026,

• Returning to around 2% in 2027 (later than previously expected).

In other words: inflation is falling, but the last part of the journey – from ~3–4% down to 2% – is expected to be slow and bumpy.

3. The next decision point: December and early 2026

The next key window for change is the December 2025 MPC meeting, which comes just after the next inflation release (November CPI, due 17 December). 

Market pricing and various commentators currently imply:

• A high probability of a small cut (from 4.0% to 3.75%) in December,

• But the decision is still finely balanced and will depend heavily on how the next inflation numbers come in.

Let’s look at three broad scenarios.

4. Three inflation paths – and what the Bank might do

Scenario A: Inflation falls faster than expected

(CPI clearly moving towards low-3% or even high-2% in the next prints)

If the next CPI numbers surprise on the downside – for example:

• CPI drops closer to 3.0–3.2%,

• Wage growth continues to cool,

• Surveys show easing price pressures in services,

then the arguments for a December 2025 cut become strong:

• Four MPC members already voted to cut in November. 

• Public inflation expectations have recently dropped to about 3.7%, easing one of the Bank’s concerns about expectations becoming “de-anchored”. 

In this faster-disinflation scenario, we could see:

• Cut to 3.75% in December,

• Followed by gradual cuts through 2026 – with OBR projections and some market forecasts pointing to Bank Rate drifting towards around 3.5–3.7% by late 2026. 

For mortgages and property, that would support:

• Further falls in fixed mortgage rates,

• Improved buyer confidence,

• Slightly more support for house prices and transaction volumes in 2026.

Scenario B: Inflation edges down only slowly

(CPI stuck around mid-3%s, services and wages still a bit too hot)

If inflation doesn’t fall much from current levels (around 3.6%), and underlying pressures (services, wages) remain sticky, the MPC will worry that:

• Cutting too soon risks stalling progress and forcing them to tighten again later.

In this “slow drift” scenario:

• The Bank could hold at 4.0% in December,

• Signal that cuts are coming, but not quite yet,

• Wait for a clearer trend into early / mid-2026.

Some forecasters, like the British Chambers of Commerce, already lean toward a view where Bank Rate stays around 4% for longer, before easing to about 3.5% by the end of 2026. 

For property, this would mean:

• Mortgage rates remain elevated compared to the pre-2022 era, but below the 2023 peak;

• House prices likely see modest, regionally mixed growth rather than a big boom;

• Rental markets stay tight, as affordability limits the jump from renting to owning.

Scenario C: Inflation re-accelerates or stalls completely

(Energy, food or wage shocks push CPI back up, or keep it stuck near 4%+)

This is the risk case.

If something pushes inflation back up – say:

• A renewed energy price shock,

• Surprises in food or services inflation, or

• Wage growth proving far stronger than expected,

then the Bank is very unlikely to cut:

• Rates could stay at 4% for an extended period,

• The MPC might even talk about the possibility of raising again (though markets currently see that as a low probability outcome). 

For property, that would mean:

• Mortgage costs stay tougher for longer,

• Some further downward pressure on prices in the most stretched, rate-sensitive segments,

• But potentially even stronger rental demand, as more households are locked out of buying.

5. What this means for the UK property market

Whichever path we follow, a few key themes stand out for housing:

1. Mortgage rates are past the peak, but not “cheap” again

We’ve already moved from a 5.25% Bank Rate down to 4.0%, and lenders have started to trim fixed-rate mortgage deals in anticipation of further cuts.

• For many buyers, monthly payments compared with 2023 peak quotes now look more manageable.

• But compared to the ultra-low rates of the 2010s, borrowing is still meaningfully more expensive.

That points to:

• A housing market that is stabilising rather than booming,

• With regional differences: areas that never saw extreme price inflation may hold up much better than the most stretched Southern markets.

2. Rents likely to stay firm

Higher-for-longer borrowing costs:

• Make it harder for renters to transition into ownership,

• Discourage highly leveraged landlords from rapidly expanding,

• Push some older or overstretched landlords to sell or deleverage.

That combination tends to tighten rental supply, which is why rents have been running ahead of wages in many areas over the last couple of years (even as rent inflation has started to cool). 

3. Yield vs capital growth balance

With interest rates off the peak but still well above zero:

• The easy capital growth phase of ultra-cheap money is over (for now),

• But income (yield) becomes more important in the investment case.

For property investors, that means:

• Focusing on solid rental demand and realistic yields,

• Being cautious about paying stretch valuations that only work if rates collapse.

6. What does all this mean for Fractional Keys investors?

Fractional Keys is being built for exactly this kind of environment – where:

• You still want exposure to property,

• But the old “buy one highly leveraged flat and hope rates stay low” model looks a lot riskier.

A few specific angles:

A. Interest rates and the platform’s strategy

As a platform focused on renovating and holding value-add properties:

• Lower Bank Rate over time reduces financing costs for the underlying property vehicles,

• Which supports net yields after debt costs,

• While still leaving room for capital appreciation if rates normalise gradually rather than crashing.

We’re not betting on any single rate outcome – instead, the goal is to build a portfolio that can weather a range of scenarios: slightly higher-for-longer, or gradual cuts.

B. Diversification beats “all-in on one mortgage”

Instead of:

• One big mortgage, on one property, at one interest rate,

Fractional Keys lets investors:

• Spread smaller amounts across multiple properties and locations,

• Smooth out local market and interest rate risk over time,

• Participate in rental income and refurbishment upside without personally carrying the debt.

C. Positioning for the next cycle

If the base rate does gradually move down from 4.0% to something like the mid-3%s over the next couple of years, as some forecasts suggest, that would: 

• Make property yields look more attractive relative to cash and gilts,

• Improve affordability for end-buyers, supporting exit values over the medium term,

• Potentially draw more capital into housing as the dust settles from the high-inflation, high-rate shock.

Fractional Keys’ role is to make that exposure accessible from small ticket sizes, rather than only for those with six-figure deposits and landlord risk tolerance.

7. Key takeaways

• The Bank Rate is 4.0%, down from a 5.25% peak – and the MPC is split, with four members already voting for a further cut. 

• Inflation has fallen to 3.6%, but getting from the mid-3%s to the 2% target will likely be slow and data-dependent. 

• If inflation falls faster than expected, the Bank could start cutting as soon as December 2025, with a path towards the mid-3%s in 2026. If it’s sticky, rates may stay at 4% for longer.

• For property, that implies stabilising rather than explosive price growth, continued upward pressure on rents, and a market where yield and cash flow discipline matter more than ever.

• For Fractional Keys investors, the focus is on using fractional ownership to access diversified, income-generating property – without personally sitting in the hot seat every time the Bank of England meets.