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SONIA Swap Rates Fall. Could We See A Rate Cut Greater Than 0.25%?

ended 17. December 2025

Following this morning’s inflation data, SONIA swap rates have moved notably lower.

As inflation continues to moderate and short-dated gilts become increasingly attractive, could this pave the way for further reductions in fixed-rate mortgage pricing?

In light of today’s inflation figures, might the more dovish members of the Monetary Policy Committee gain greater influence, potentially fuelling calls for rate cuts exceeding the usual 25 basis points?

With markets now pricing in three rate cuts for 2026, should the 1.9 million homeowners coming off fixed-rate mortgage deals consider holding off before locking into a new product?

Source: Chatham Financial

 

5 responses from the Newspage community

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Riz Malik
Independent Financial Adviser at R3 Wealth
Today's inflation figures have sparked renewed optimism in the mortgage market, offering a glimmer of hope for the 1.9 million deals due to expire in the next year. While rate cuts may be on the horizon, relying on market timing is risky. Review your options now to stay ahead of any sudden shifts. Working with a broker who monitors rates could help you stay ahead.
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Aaron Strutt
Product and Communications Director at Trinity Financial
If the base rate comes down again then it is hard to see fixes not getting a bit cheaper. The best two-year deals are already very competitively priced, but there is scope for them to get even better.
Many of the borrowers coming up for renewal could consider taking a variable rate and holding off to see what happens to fixes, especially if they are keen on taking a five-year fix. It is a pretty good time to take out a tracker mortgage, given that multiple Bank of England base rate cuts are expected. The Bank needs to do more to boost the UK economy, which ultimately means it needs to lower the base rate a few more times to ease some of the pressure on consumers and homeowners. If the best trackers are priced at 0.11% over the base rate and the cheapest five-year fixes start from 3.75% then it may be worth waiting before locking into a new deal through a switch to fix product or a no early repayment charge rate.
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Dariusz Karpowicz
Director at Albion Financial Advice
Finally, some good news to cut through the gloom. SONIA swap rates dropping after this morning's inflation data is a welcome signal for anyone eyeing a mortgage. Yes, the government keeps shifting the goalposts, the Budget left us all a bit bruised, and tax changes loom large. But lower rates could spark life into other sectors too, and that's genuinely positive for buyers who've been sat on the sidelines.
If you're one of the 1.9 million homeowners with a deal expiring soon, don't bank on perfect timing. Markets can shift overnight. Consider a tracker if you want flexibility; the best sit at just 0.11% over base rate while five year fixes start around 3.75%.
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Samuel Mather-Holgate
Managing Director & IFA at Mather and Murray Financial
Earlier this week I said markets have been underestimating the possibility of a 0.5% mega-cut in the base rate tomorrow and this morning's good news on inflation suggests that remains a possibility, especially with unemployment rising. The fact that swap rates are headed south suggests markets are pricing in more cuts, even if we do only get a 0.25% cut on Thursday.
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Shaun Sturgess
Director at Sturgess Mortgage Solutions
While Wednesday's inflation data makes a rate cut almost certain, I still believe the Bank of England will play it safe with only a modest 0.25% reduction. Threadneedle Street has shown time and again that it’s overly cautious and this time round is unlikely to be any different. With unemployment hitting 5.1% and inflation falling more than expected, a 0.5% cut would send a strong signal of intent to stimulate growth and ease pressure on households and businesses. But will it come? I don't think so.