The Bank of England has reduced the base rate from 5% to 4.75%. This matters because the base rate influences what banks and lenders charge for mortgages.

It’s the second cut this year, following a drop from 5.25% in August. Here’s what it means for different types of mortgages:

Tracker Mortgages:
If you have a tracker mortgage, your rate is linked directly to the base rate, so you should see a decrease in your payments. On average, this change would lower costs by around £15 per month per £100,000 of the mortgage balance.

Fixed-Rate Mortgages:
For those on fixed-rate deals, nothing changes immediately. Your payments remain the same until your fixed term ends. However, new fixed-rate offers may come down slightly, so it’s worth exploring your options if you’re nearing the end of a deal. Remember, failing to act could see you moved onto your lender’s usually expensive Standard Variable Rate (SVR).

Standard Variable Rate (SVR):
If your mortgage has reverted to the SVR, your rate might decrease, but it’s not guaranteed. SVRs can change at the lender’s discretion, though they often follow the base rate movements. SVRs tend to be more expensive than fixed or tracker deals, so it could be a good time to see if you can secure a better deal.

Considering New Deals:
If your fixed term is ending soon, consider looking at new deals in advance, as you can often lock in a rate three to six months ahead. Alternatively, if you prefer flexibility, a tracker mortgage without early repayment charges could be an option, letting you switch later without penalties if rates drop further. However, keep in mind that trackers are currently more costly than some fixed-rate options.

The base rate change reflects efforts to control inflation, which recently fell below the Bank’s 2% target. Further base rate cuts are possible but may be slow, depending on economic conditions.