The Bank of England has cut interest rates from 4.75% to 4.5% – the lowest level since June 2023.

Will my mortgage get cheaper?

For the majority of borrowers, the answer is no: most people with mortgages are on a fixed-rate deal, which means their monthly repayments will stay the same.

The cut will translate into lower borrowing costs for homeowners with a base rate tracker mortgage – the rate of which will fall in line with the Bank’s cut. Borrowers on their lender’s standard variable rate (SVR), or a mortgage linked to it, will have to wait and see. Although it is likely that lenders will reduce their SVRs, they are not obliged to do so and could choose to keep the rate as it is or pass on only some of the cut.

About an hour after the latest Bank decision was announced, Santander, one of the UK’s biggest lenders, confirmed it would pass on the full cut to its variable-rate mortgage customers from 3 March. The lender’s SVR will decrease to 6.75%, tracker deals will fall, and its “follow-on rate”, which applies to some customers at the end of their deals, will go to 7.75%.

Will new mortgage deals be better?

The price of fixed-rate mortgages is linked to the outlook for interest rates.

Lenders have recently been reducing mortgage rates in anticipation of several rate cuts this year. On Thursday, Yorkshire building society cut interest rates by up to 0.31%, with the biggest reductions for borrowers with a 40% deposit. Rates on its 90% mortgages were cut by up to 0.17%. After the cuts, a 75% two-year fixed-rate mortgage for remortgagers will cost 4.39%.

Holly Tomlinson, a financial planner at Quilter financial advisers, says: “We may see some lenders introduce more competitive fixed-rate deals in the coming weeks but typically most new deals have already priced in today’s cut.”

Thursday’s decision was expected, but the fact that two economists voted for a steeper, half a percentage point cut may make the markets believe rates will come down further than they had anticipated. Mortgage rates could fall if that is the case.

How about savings?

The returns on savings are generally not explicitly tied to the Bank of England base rate, but Thursday’s reduction is likely to be passed on to many savers who have easy-access accounts and others who do not have accounts with fixed interest rates. Many will have already had their returns cut as a result of November’s base rate reduction.

Interest rates on new fixed-rate accounts have already been falling – like fixed-rate mortgages they reflect expectations of where the base rate will be in future. The average rate you can get on a one-year fixed-rate deal, according to Moneyfacts, is 4.2% – below the base rate.

However, some banks – particularly the newer names – are keen to attract business, so there are some reasonable deals available if you shop around. You can earn 4.67% on a one-year fixed-rate bond via the savings platform Raisin UK, for example.

“Savers will see easy access savings rates edging lower, so should check out the best buys and switch to a better rate if their bank is offering a substandard deal,” says Andrew Hagger, the founder of Moneycomms.co.uk.

“If you’re thinking of putting some cash away for a year or two in a fixed-rate bond or Isa, now would be a sensible time to lock in at current levels while you still can.”