Millions of homeowners could see their mortgage bills fall by hundreds of pounds this year if the Bank of England cuts interest rates as expected this week.
The Bank of England is expected to cut the base rate to 4.25 per cent, a decision that could ease pressure on certain borrowers.
Over 1.8 million fixed-rate mortgage deals are due to expire this year. That means a huge number of people will soon need to remortgage. A rate cut would mean they have access to lower rates than have been seen over the past year.
The base rate is currently 4.50 per cent however most experts expect it to fall to 4.25 per cent this Thursday as the Bank responds to weaker growth and lower inflation.
Sandra Horsfield, economist at Investec, said: "It is a near-certainty that borrowing costs will be eased further." She added: "Most participants in the financial markets are pricing in a cut."
New figures from NerdWallet UK show just how much borrowers could save if that cut goes ahead. Their projections are based on average mortgage sizes, typical deposits and common loan terms for both first-time buyers and home-movers.
If the Bank cuts the base rate once, average rates could fall to 4.4 per cent and monthly payments could drop to £1,266
GETTYA typical first-time buyer purchasing a property at £311,034 with a £61,090 deposit over 30 years currently pays around £1,317 a month on a two-year fixed deal.
If the Bank cuts the base rate once, average rates could fall to 4.4 per cent and monthly payments could drop to £1,266 — saving £784.80 a year.
If the Bank cuts rates twice to four per cent, the rate could fall to 4.1 per cent, reducing payments to £1,207 and saving £1,221.48 a year.
For home-movers, the potential savings are even greater. Based on a property price of £370,500, a £48,350 deposit and a 26-year term, current payments sit around £1,794 a month.
A single rate cut could reduce this to £1,742, saving £622.92 a year. Two cuts could drop payments to £1,669, saving £1,469.28.
There are many mortgage deals on the market GETTYBorrowers on tracker or standard variable rate (SVR) mortgages would see the biggest and fastest impact.
There are around 850,000 tracker mortgage holders in the UK, and their repayments move in line with the base rate.
Sam Fox, mortgage expert at UK Mortgage Centre, said: "Borrowers on variable deals will see an immediate impact — if the rate is cut, then mortgage payments are reduced."
He added: "Small moves in the base rate will equal a more noticeable impact over the long term."
Around 494,541 older people are still burdened with paying monthly mortgage paymentsGETTYThose on fixed rates won’t see an instant change but could benefit when their deal ends.
"Fixing whilst the rates are dropping means you can secure some of the lowest rates we’ve seen for years," said Fox. "That way if any rate hikes occur, you’ll be protected."
Fox also dismissed fears of a surprise hike.
He said: "While a surprise move is always possible, it's highly unlikely we'll see a surprise rate hike in the near future. If anything, the bigger surprise could be a faster-than-expected rate cut."
