Interest rate cut to hand everyone with a mortgage £384 a year | Personal Finance | Finance

Mortgage holders could save as much as £384 a year if the Bank of England reduces the Base Rate tomorrow, a new analysis shows.

With inflation currently sitting at 1.7%, the Bank’s Monetary Policy Committee is widely expected to cut the central interest rate from 5% to 4.75%, marking a reduction of 0.25%.

For the average UK homeowner with a 75% loan-to-value (LTV) ratio on a tracker rate mortgage, calculations by TotallyMoney show a 0.25% cut could reduce their payments by £32 per month, or £384 per year.

When combined with the 0.25 percentage points cut in August, this represents a combined monthly saving of £63 per month or £756 per year.

Alastair Douglas, CEO of TotallyMoney said: “While the days of 1-2% mortgages may feel like a distant memory, the Bank of England’s rate cut will feel like good news to many.

“Hopefully, we’ll see the trend continue into 2025, and beyond. But what’s important is that the banks pass the savings on to borrowers, and don’t just trim the interest from savers.”

This comes as arrears are estimated to increase to 128,800, from 105,600, this year, while repossessions are expected to rise by 16%, to 5,100.

Mr Douglas urged any homeowners who are struggling to keep up with mortgage payments to contact their bank as soon as possible.

He said: “It might feel daunting having to pick up the phone and explain your situation, but lenders have been told by the Government that they must act in the best interest of their customers.

“Around 4,000 homeowners will be seeing their current, cheap mortgage deals coming to an end each day. But it’s important not to wait until then before locking in your next offer.

“Otherwise, your bank will put you onto their Standard Variable Rate — and these can reach almost 9%, resulting in a significant hike to your monthly payments. So start shopping around up to six months in advance.”

Andrew Hagger, personal finance Expert, Moneycomms.co.uk added: “Mortgage customers are overdue a bit of good news, and a rate cut will help them feel more positive about their finances as they head into 2025.

“Consumers are still finding it challenging to balance their household budgets, so a second cut in interest rates in four months should help people feel less anxious about their finances.

“For those currently on a fixed rate mortgage, the financial benefit won’t be felt immediately but it should make a worthwhile difference next time they come to review their fixed or discounted deal.”

The Bank of England will announce its next Base Rate decision at midday on November 7.