Major British banks minimize mortgage charges after base price falls – however specialists warn on future fastened offers

Borrowers with variable rate mortgages are likely to see their monthly payments reduce after the Bank of England cut the base rate from 5 per cent to 4.75 per cent. 

In response to yesterday’s decision, some major lenders have already announced that borrowers on tracker mortgages or standard variable rates will see rates fall.

Almost all of those on tracker mortgages should see an immediate benefit from the base rate cut, as these rates follow the Bank of England’s base rate plus a set percentage.

For example a deal set at base rate plus 0.75 per cent will fall from 5.75 per cent to 5.5 per cent as a result of yesterday’s decision.

Borrowers on their lenders standard variable rate may also see their monthly costs fall, but this is at each lenders’ discretion.

SVRs are lenders’ default rates that people tend to move on to if their fixed rate period ends and they do not remortgage on to a new deal.

Which banks are cutting mortgage rates? 

Nationwide has already announced reductions for customers on variable rates. 

Those on its standard mortgage rate, another name for a standard variable rate, of 7.74 per cent, will see a decrease of 0.25 per cent to 7.49 per cent from 1 December.

Meanwhile, rates on tracker mortgages held by existing Nationwide customers automatically decrease when bank rate is cut, so these will also decrease to reflect the base rate change from 1 December 2024.

For new customers, Nationwide’s now-lowest tracker rate is immediately available at 4.94 per cent with a £999 fee (base rate plus 0.19 per cent).

This deal comes without any early repayment charge, so borrowers should be able to exit the deal without fees to pay – one of the advantages of a tracker. 

Santander also announced changes. 

All existing Santander tracker mortgage products linked to the base rate will decrease by 0.25 per cent from 3 December 2024. 

It will also cut its SVR by 0.25 percentage points to 7 per cent from 7.25 per cent.

Lloyds and Halifax‘s mortgage customers will also see their SVR fall.

Halifax’s SVR is currently at 8.49 per cent and will decrease by 25bps to 8.24 per cent.

Halifax’s lowest tracker deal for new customers is one of the best on the market at 4.83 per cent (base rate plus 0.08 per cent). This is for buyers purchasing with at least a 40 per cent deposit.  

Barclays will be reducing its SVR from 8.49 per cent to 8.24 per cent.

On trackers, the current rate of 6.99 per cent (base rate plus 1.99 per cent) is being slashed to 6.74 per cent. 

TSB also announced it will be cutting its SVR in line with the Bank of England base rate. This will take effect from 11 November.

Smaller lender MPowered Mortgages has cut  its SVR by three times the Bank of England’s cut, with its SVR going from 7.49 per cent to 6.74 per cent.

If your mortgage lender has not announced anything yet, there is still time.  

David Hollingworth, associate director at broker L&C Mortgages said: ‘In terms of cuts following yesterday’s base rate decision, we’ve seen largely tracker rate movement along with a few SVRs. 

‘All trackers will move in line with the base rate cut but lenders can take a bit of time to announce.

‘We’re expecting to see more cuts on SVRs as well, though they tend to dribble through a little over the coming weeks and months.’

Will my tracker mortgage rate be cut? 

Some 8 per cent of mortgaged households, around 700,000, are on tracker mortgages according to UK Finance, with an average outstanding balance of £139,124.

The average rate prior to yesterday’s base rate cut was 6.44 per cent meaning a typical tracker mortgage borrower was paying £1,032 a month.

Now that the base rate has been cut by 0.25 basis points, this should result in the typical tracker repayment mortgage falling to around 6.19 per cent and monthly payments falling to £1,012 – a £20 monthly saving.

As for those on interest-only tracker mortgages, the average borrower should see a monthly saving of around £29, according to UK Finance.

Chris Sykes, technical director at mortgage broker, Private Finance said: ‘Following the base rate decision we received various emails from lenders informing us they were reducing their tracker deals.

‘If you are on a tracker deal, your rate should generally reduce either straight away or imminently.’ 

Will my standard variable rate be cut? 

About 693,000 mortgaged households are currently on a standard variable rate, according to UK Finance.

The average SVR household is on a rate of 7.01 per cent with an outstanding mortgage of £82,438. This means the typical SVR household is paying  £701 a month

SVRs can be changed by lenders at any time, and will usually rise and fall when the base rate does. However, they can go up or down by more or less than the Bank of England’s move.

If a lender decided to pass on the full 0.25 basis point cut to customers, they would see an average reduction of £17.17 in their monthly payments, according to analysis by UK Finance.

‘With SVRs, they are not linked directly to base rate, they are priced off each bank’s internal metrics,’ said Sykes.

‘When base rate was going up, not all banks passed on those increases onto borrowers. So now, as base rate comes down, they may not fully pass on all of the reduction on.’

Will fixed rate mortgages be cut?

Around 82 per cent of mortgaged households are on fixed rate deals, according to UK Finance. That equates to almost 7million homes. 

None of these people will be immediately affected by the base rate cut, because their rate won’t change until the end of their fixed term.

What is happening to interest rates could impact them when they apply for their next mortgage, although changes in the base rate do not always directly and immediately translate into fixed mortgage pricing. 

In reality, mortgage rates are dictated by future market expectations for interest rates, banks’ funding and lending targets and their appetite for new business.

Market interest rate expectations are reflected in swap rates. These are influenced by long-term market projections for the Bank of England base rate, as well as the wider economy, internal bank targets and competitor pricing.

Swap rates create a benchmark of where the market thinks interest rates will go. 

As of 6 November, two-year swaps were at 4.25 per cent and five-year swaps were at 4.09 per cent.

It’s very rare for the lowest fixed rate deals to be below their equivalent swaps, which they are at present – suggesting there could be rises to come.

The lowest five-year fixes and two-year fixes are currently below 4 per cent. Brokers are therefore warning that this means fixed rates are more likely to rise than fall at present.

Chris Sykes added: ‘Fixed rates are not linked to base rate and if anything fixed rates are going up at the moment because the costs of funding is a lot higher now than it was a couple of weeks ago, thanks to the Budget.

‘There are still fixed rates available that were set before the Budget. If anything, we will likely see these rates increase over the coming weeks.’