A cut in interest rates will mean the 590,000 people with a base-rate tracker mortgage will see borrowing costs fall from tomorrow, August 8. That could equate to £346 annually
Mortgage holders are poised to pocket a £29 monthly saving from Thursday following The Bank of England’s decision to slash interest rates from 4.25% to 4%. The cut will deliver reduced borrowing costs for the 590,000 homeowners saddled with base-rate tracker mortgages.
Banking organisation UK Finance estimates that a standard tracker-mortgage customer (carrying an outstanding debt of just under £140,000) will witness monthly repayments drop by £28.97 following Thursday’s announcement, reports Birmingham Live. That equates to £346 annually.
Nicholas Mendes from broker John Charcol observed: “Mortgage rates have been edging lower in recent weeks,” before noting: “We’ve started to see a handful of five- and two-year fixed rates priced below 3.8%.” In other similar news, a state pension warning for millions of Brits who are between two specific ages.
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Mendes explained: “Two- and five-year deals are very closely priced. Some borrowers want flexibility if rates fall again, while others prefer the certainty of locking in for longer,” adding: “It’s less about timing the market and more about what fits your plans.”
Alice Haine, personal finance analyst at Bestinvest by Evelyn Partners, the online investment platform, remarked: “Households hoping for further respite from high borrowing costs had their wishes granted today as the Bank of England voted to cut the base rate by 25 basis points to 4%.”
She continued: “The move, widely anticipated by the markets, comes amid sputtering economic growth, as rising employment costs weigh on business activity and the jobless rate hits its highest level in nearly four years. The rate-setting Monetary Policy Committee’s split vote of 5-4 in favour of a rate reduction highlights the delicate balancing act of supporting growth and containing inflation.”
Alice added: “Consumer price inflation rose to 3.6% in the 12 months to June – almost double the BoE’s target of 2% – a likely reason why four committee members voted to hold rates steady at 4.25%. But with demand for workers softening, wage growth easing, economic output stagnating and lingering global headwinds, the Bank of England appears to be looking past inflation to prioritise growth.”
Guy Anker, money expert at Compare the Market, said: “Today’s decision by the Bank of England to cut interest rates could provide some welcome relief for many homeowners and prospective buyers.”
“With mortgage rates having risen sharply over the past two years, today’s move could help ease some of the pressure on borrowers – especially those on variable-rate or tracker deals, and those coming to the end of a fixed term or tracker deal, who are looking into future repayment options.”
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He continued: “However, lenders may pass on rate cuts at different speeds, and not all mortgage products will become cheaper overnight, making it crucial for consumers to compare deals carefully. Whether you’re re-mortgaging, buying your first home, or just looking to reduce monthly payments, shopping around online could help you find which competitive rates are available to you.”
Creditspring’s consumer finance expert, Tamsin Powell, remarked: “People are still facing high living costs and stretched budgets – and any small shift in the base rate is unlikely to bring immediate relief.” She continued: “We know that borrowing has become more expensive in recent years, but even as interest rates begin to fall, affordable credit will remain out of reach for millions.”
Highlighting the precarious situation many face, she said: “For those without a financial cushion, even a minor unexpected expense – a broken appliance, car repairs, or back-to-school costs – can still cause serious stress.” Powell stressed: “It’s vital that we don’t assume a rate cut fixes the problem. What people need is access to fair, simple financial support that doesn’t push them further into debt.”
She concluded by emphasising the importance of financial literacy: “At the same time, improving access to financial education is essential, especially for younger people and those new to borrowing. Knowing how credit works, what good borrowing looks like, and how to avoid costly mistakes can make all the difference when money is tight.”