Following on from base rate cut: How has the mortgage market reacted?

Find out whether your lender is among those to have already passed on the reduction to variable mortgage rates.

After the Bank of England base rate remained stagnant at 5.25% for approximately a year, many borrowers will be hoping the recent 0.25 percentage point cut will make their mortgage repayments more affordable. We take a look at which lenders have already passed on the reduction to their deals:

Variable mortgage rates slashed

Many prominent high street lenders were quick to respond to the base rate cut; in the hours following the announcement, the likes of Santander, Virgin Money and first direct confirmed they would each be passing on the reduction to selected variable rate products.

This will see all of Santander’s tracker mortgages linked to the base rate decrease by 0.25% as of 3 September 2024. From the same date, the lender will also reduce its Standard Variable Rate (SVR) by 0.25% to 7.25%.

Likewise, Virgin Money said it will cut its Residential SVR from 9.24% to 8.99%. Alongside this, the lender unveiled plans to reduce its Loyalty Rate from 8.99% to 8.74% (available to qualifying residential customers who have held a Virgin Money mortgage on the same property for seven or more years) and its Buy-to-Let Variable Rate from 9.44% to 9.19%. These revised rates will come into effect for new customers from 22 August 2024, while existing customers will need to wait slightly longer - until 1 September 2024.

Meanwhile, first direct reduced selected rates with immediate effect from last Thursday; its variable tracker rate mortgages all fell by 0.25%. A similar cut to variable tracker rate mortgages offered by the lender’s sister bank, HSBC, took place a day later.

Also as of 2 August 2024, Barclays Mortgage reduced its variable tracker rates and SVR by 0.25% in line with the base rate reduction. This now sees its SVR charge 8.49%.

As for mutuals, Yorkshire Building Society confirmed it will be decreasing its tracker rate mortgages by 0.25% and cutting its SVR from 8.24% to 7.99% on 25 August 2024. The Standard Mortgage Rate (SMR) from Nationwide BS is also set to be slashed from 7.99% to 7.74% from 1 September 2024.

Plenty of other lenders, including MPowered Mortgages, Clydesdale Bank, Yorkshire Bank and Accord Mortgages, also made changes; borrowers wondering whether their existing mortgage will be impacted by the base rate cut would be best to speak with their lender.

Will fixed mortgage rates fall?

Although variable rates tend to be more greatly affected, lenders will sometimes factor in changes to the base rate when repricing their fixed deals.

As of today, the average rate charged by a two-year fixed mortgage has so far fallen to 5.70%, while the average five-year fixed rate dropped from 5.38% to 5.33% since the start of the month.

However, fixed mortgage rates were already on a downwards trajectory in the month prior to the base rate announcement; the average two and five-year deal cooled off significantly from 5.95% and 5.53%, respectively, at the start of July in response to a positive swap market.

Whether fixed rates will continue to fall depends on a variety of factors, including consumer interest and lenders’ profit margins – not just the Bank of England base rate. As the pricing of mortgages is sensitive to even slight changes in market conditions, it may be necessary to act quickly to secure an attractive deal.

Should you speak to a mortgage broker?

Mortgage brokers remove a lot of the paperwork and hassle of getting a mortgage, as well as helping you access exclusive products and rates that aren’t available to the public. Mortgage brokers are regulated by the Financial Conduct Authority (FCA) and are required to pass specific qualifications before they can give you advice.

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