Exact dates over half a million households will save £346 a year after Bank of England rate cut
HUNDREDS of thousands of borrowers are set to see their mortgage bills plunge thanks to changes to the Bank of England’s base rate.
Borrowers on tracker mortgages will noticeably benefit when central interest rates change as their monthly repayments are directly linked to this rate.
These households can expect to see monthly repayments tumble by an average of £28.44 a month or £341 a year as a result of the latest movement in the base rate, according to calculations by trade body UK Finance.
It comes after monetary policymakers at the Bank of England (BoE) earlier this month voted to cut rates from from 5.25% to 5%.
The decision provides relief to mortgage borrowers across the board after the rate had been held at a 15-year high of 5.25% since August 2023.
Fixed rate borrowers should notice cheaper mortgages as they come to the end of their deals.
Lenders tend to move Standard Variable Rates (SVR) when the base rate changes, too, meaning borrowers on this repayment model should also notice bills falling.
But those who see the benefit most quickly are borrowers on variable rate mortgages, which move in line with the base rate – also known as tracker mortgages.
On these deals, you’ll usually pay the base rate plus an additional percentage in interest every month.
There are 643,000 mortgage customers currently on tracker mortgages, according to UK Finance.
But lenders don’t all move at the same time to cut tracker rates – and the exact terms of when your repayment changes will be in the details of your deal.
However, most major lenders have confirmed when tracker customers – and some SVR customers – will see their bills fall, as detailed below. All fixed rate mortgage customers will not see bills change.
BARCLAYS
Borrowers with tracker or variable rate mortgage with Barclays will see mortgage rates fall by 0.25% on September 1.
A Barclays spokesperson said: “Following the decision by the Bank of England to decrease its base rate, we will be decreasing our rates across tracker mortgage and Barclaycard products.”
HALIFAX
Customers with mortgages that track the bank base rate will see their rate cut with immediate effect in line with their terms and conditions.
The Halifax homeowner variable rate, currently at 8.74%, will also decrease by 25bps to 8.49%.
The Halifax standard variable rate, currently at 8.74%, will decrease by 25bps to 8.49%.
All changes will come into effect for existing customer accounts from September 1.
HSBC
From Friday, August 2 all HSBC tracker rates were reduced in line with the Bank of England base rate.
However, the bank has no plans to reduce its residential standard variable rate.
NATWEST
Following the Bank of England base rate cut, customers on tracker mortgages will see rates fall from September 1.
The lender will also be passing on the rate cut in full to customers on an SVR mortgage.
SVR will be reduced from 8.24% to 7.99%, effective from 1 September.
SANTANDER
Santander announced that it would decrease all tracker and standard variable rate mortgages by 0.25% in line with the base rate from September 3, 2024. .
This includes the Santander Follow-on Rate (FoR), which will decrease to 8.25%.
The Santander SVR will also decrease by 0.25% to 7.25%, passing on the full base rate decrease from September 3 2024.
LLOYDS BANK
Customers with a mortgage that tracks the bank base rate will have seen their rate cut with immediate effect in line with their terms and conditions.
The Lloyds Bank homeowner variable rate, currently at 8.74% will decrease by 25bps to 8.49%.
The Lloyds standard variable rate, currently at 7.25% will decrease by 25bps to 7.00%
All changes will come into effect for existing customer accounts from September 1.
SHOULD YOU FIX YOUR MORTGAGE?
The average two-year tracker mortgage rate is 5.68%, according to data firm Moneyfacts.co.uk.
At the same time, the average two-year fixed rate is 5.64%.
On the surface, there is not much difference.
However, the exact rate you can get will depend on your individual circumstances, and even a few points can affect your repayments.
For example, you could get a much lower rate if you have equity of 25% or more in your home.
A good independent broker can help you to search the market and find the lowest rate available to you.
There are also other considerations besides price, if you’re looking for peace of mind over your mortgage payment a fixed rate deal is likely to be the best option.
Your repayments won’t rise, or fall, for the duration of the deal so you can budget with confidence.
Pete Mugleston, from onlinemortgageadvisor.co.uk, said: “Buyers must carefully evaluate their financial situation, not just in the context of current rates, but also considering potential future changes in interest rates and personal circumstances.
“A mortgage is a long-term commitment, and what might seem like an excellent deal today could become less favourable if rates fluctuate or personal financial situations change down the line.”
How to get the best deal on your mortgage
IF you're looking for a traditional type of mortgage, getting the best rates depends entirely on what's available at any given time.
There are several ways to land the best deal.
Usually the larger the deposit you have the lower the rate you can get.
If you’re remortgaging and your loan-to-value ratio (LTV) has changed, you’ll get access to better rates than before.
Your LTV will go down if your outstanding mortgage is lower and/or your home’s value is higher.
A change to your credit score or a better salary could also help you access better rates.
And if you’re nearing the end of a fixed deal soon it’s worth looking for new deals now.
You can lock in current deals sometimes up to six months before your current deal ends.
Leaving a fixed deal early will usually come with an early exit fee, so you want to avoid this extra cost.
But depending on the cost and how much you could save by switching versus sticking, it could be worth paying to leave the deal – but compare the costs first.
To find the best deal use a mortgage comparison tool to see what’s available.
You can also go to a mortgage broker who can compare a much larger range of deals for you.
Some will charge an extra fee but there are plenty who give advice for free and get paid only on commission from the lender.
You’ll also need to factor in fees for the mortgage, though some have no fees at all.
You can add the fee – sometimes more than £1,000 – to the cost of the mortgage, but be aware that means you’ll pay interest on it and so will cost more in the long term.
You can use a mortgage calculator to see how much you could borrow.
Remember you’ll have to pass the lender’s strict eligibility criteria too, which will include affordability checks and looking at your credit file.
You may also need to provide documents such as utility bills, proof of benefits, your last three month’s payslips, passports and bank statements.