Average tracker mortgage payments will fall by nearly £30

The average homeowner on a tracker mortgage will see their monthly payments fall by £28.98, according to UK Finance.

Someone on a standard variable rate (SVR) mortgage will see their monthly payment reduce by £17.17 on average, following the 0.25 percentage point cut to the Bank of England base rate on Thursday.

The Bank’s Monetary Policy Committee (MPC) announced a base rate cut from 5% to 4.75%.

Around 629,000 outstanding homeowner mortgages are trackers, which follow the movements of the base rate, while 693,000 are SVR deals.

Borrowers end up on an SVR after their initial mortgage deal ends.

Four-fifths of outstanding homeowner mortgages, totalling 6,882,000, are fixed-rate deals.

Homeowners on fixed-rate deals will not see any immediate change in their payments.

Some mortgage holders are yet to feel the impacts of the spate of base rate increases which started three years ago. The increases were followed by two cuts, the first of which happened during the summer and the second on Thursday.

It means that some homeowners are still facing the hurdle of re-mortgaging onto higher rates than they have previously been used to.

UK Finance analysis shows that around 1.8 million fixed-rate mortgages will end in 2025 – and 1.4 million are due to end, or have already ended, this year.

Lenders are encouraging borrowers who are struggling with their payments to contact them immediately for support, rather than waiting to miss a payment.

Andrew Montlake, managing director of Coreco mortgage brokers said: “Whilst this cut will be welcomed by all those looking to buy or remortgage in the near future, it is important to note that this does not necessarily mean that mortgage rates will drop substantially in the short-term.”

He added: “However, the good news is that this shows the Bank of England is confident that even amongst all the uncertainty they have now tamed inflation sufficiently to be able to continue with their longer-term plans to reduce interest rates.”

David Hollingworth, associate director at L&C Mortgages said: “Most borrowers have continued to fix their rates to benefit from the lower rates they offer when compared with variable rate deals.

“Counterintuitively those fixed rates have been nudging upwards despite the cut to base rate, as the market perception of the inflation and rate outlook has shifted.”

Rightmove’s mortgage expert, Matt Smith, said: “This base rate decision comes at the end of a run of important macro-economic and political events on both sides of the Atlantic.

“All of this has resulted in a view that base rate will be cut at a more moderated pace than previously expected and has been priced in by lenders. Therefore we are likely to see average mortgage rates drift up a little in the short term, before starting to fall back again.

“Today’s decision will probably help relieve pressure on lenders to increase rates as we had started to see. If the last few weeks has taught us anything, it is that the UK mortgage market remains competitive, but headline pricing will continue to be impacted by events both in the UK and overseas.”

Richard Donnell, executive director at property website Zoopla said: “The reduction in the base rate to 4.75% is welcome news and has supported continued strong sales growth over 2024 versus last year.”

Kevin Roberts, managing director, Legal & General Mortgage Services said: “The mortgage market has really opened up since the Bank of England announced its first cut in August, with borrowers finding dynamic and cheaper products in front of them.”

The rate cut could mean tougher times for savers – increasing the need to shop around for the top deals.

According to Moneyfactscompare.co.uk, the average easy access savings rate on offer has already fallen from 3.15% in August to 3.03% in November.

The average easy access Isa rate has fallen from 3.36% to 3.24% between August and November.

Rachel Springall, a finance expert at Moneyfactscompare.co.uk, suggested some savers may want to consider savings accounts offered by challenger banks.

She said: “Challenger banks are offering attractive returns and it would be unwise to overlook them.”

Ms Springall added: “Savers need to proactively keep on top of the best rates and review their pots regularly to see if they are getting a raw deal.”