The average homeowner on a tracker mortgage will see nearly £29 shaved off their monthly payments, following the quarter point cut in the Bank of England base rate, according to industry figures.

Banking and finance industry body UK Finance calculated that the reduction in the base rate on Thursday, from 4.25% to 4%, will mean the typical mortgage holder on a deal that directly tracks the base rate will pay £28.97 per month less, based on the average balance outstanding.

Over a year, this adds up to a reduction of nearly £350 (£347.64).

Those on a standard variable rate (SVR) deal could see their monthly mortgage payments reduce by £13.87 on average, adding up to an annual saving of £166.44 – provided the lender passes on the base rate cut in full.

Borrowers often end up on an SVR when their initial deal ends and the rate is set by individual lenders but often follows movements in the base rate.

Homeowners on fixed-rate mortgages will see no immediate change, although thousands are due to remortgage in the months ahead.

Around 900,000 fixed-rate mortgage deals are due to expire in the second half of 2025, according to UK Finance’s figures, with 1.6 million fixed deals having ended or being due to end across the whole of the year.

Charles Roe, director of mortgages at UK Finance, said: “Today’s rate cut by the Bank of England takes us back to where we were just over two years ago when rates were last at 4%.

“While most mortgage holders are on fixed-rate deals, the cut will be welcomed by those on tracker or variable rate mortgages. This rate reduction should also help new mortgage applicants, as affordability and overall borrowing costs could improve.”

Andrew Montlake, chief executive of Coreco mortgage brokers, said: “It now seems there is maybe just room for one more cut before the end of the year if inflation starts to play ball, and whilst you may see two and five-year fixes reach around 3.5%, it is unlikely to fall much further.

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“The last quarter of the year is set to be a busy time in the mortgage market as lenders battle for business in a competitive environment and borrowers take advantage of a buyer’s market whilst it is still around.”

David Hollingworth, associate director at L&C Mortgages, said: “The good news for fixed rate borrowers coming to the end of a deal is that rates have been falling.

“That’s because today’s cut was so widely expected that it’s already allowed lenders the chance to improve their rates although it means we are unlikely to see fixes plummet further because of today’s cut.”

Nicholas Mendes, mortgage technical manager at John Charcol said: “Mortgage rates have been edging lower in recent weeks, helped by falling swap rates and a fresh price war among lenders.

“Many banks are off their annual targets, particularly on the purchase side, so they’re sharpening rates to compete for remortgage business instead. That’s why we’ve started to see a handful of five and two-year fixed rates priced below 3.8%, even as inflation remains above target.”

He said that for those borrowers “rolling off sub-2% pandemic-era deals this year, the gap between old and new repayments is still significant, but it’s narrowing. The payment shock is nowhere near what we were seeing 12 to 18 months ago.”

Mr Mendes added: “For anyone approaching the end of their current mortgage deal, it makes sense to start the process around four to six months before it expires, depending on your lender.

“That gives you time to consider both a product transfer with your existing lender and the option of remortgaging to a new one. Most lenders will allow you to secure a rate early, which means that if the market moves against you and rates rise, you are protected.

“If rates fall, there is often the opportunity to switch to a lower deal before completion, either with the same lender or a different one, provided you have kept an eye on fees, timelines and any cancellation clauses.”

Matt Smith, a mortgage expert at Rightmove, said: “Lenders have been competing for business in a market which has the largest supply of homes for sale in a decade.

“A combination of rate cuts and changes to buyer affordability criteria are helping many home movers to responsibly borrow more towards the home that they want.

“The market expects there will be one more (Bank of England base rate) cut before the end of the year, with an outside chance of two. Any further cuts would likely see this cycle repeat again, with lenders using it as an opportunity to reduce rates a little more.

“It bodes well for the second half of this year, with further mortgage rate reductions and stable prices likely to encourage more activity.”

Mark Manning, managing director of Northern Estate Agencies Group said: “Today’s rate reduction will help to settle people’s nerves and ensure the property market remains buoyant.”

Rachel Springall, a finance expert at Moneyfactscompare.co.uk, said: “The continuation of falling mortgage rates will instil a sense of confidence among borrowers.”

She added: “Lenders have also been relaxing stress tests to further support mortgage customers.”

Ms Springall added: “In positive news, swap rates have been edging downwards once again in recent days, which will give lenders more scope to reduce fixed mortgage rates.”

She said: “There remains a clear financial gain for borrowers to shift from a variable rate mortgage onto a cheaper fixed rate, as a typical mortgage borrower being charged the current average standard variable rate of 7.42% would be paying £372 more per month, compared to a typical two-year fixed rate.”

Moneyfacts’ calculation was based on a £250,000 mortgage, being repaid over a 25-year term.

Ms Springall also said that base rate reductions “will spell further misery for savers”.

She said: “It is essential that savers do not wait around for too long to snap up the top rates on the market, particularly if they use their pots to supplement their monthly income.”

According to Moneyfactscompare.co.uk, the average easy-access savings rate on the market in August is 2.68%, down from 3.15% in the same month a year ago.

The average easy-access Isa on the market in August offers 2.90% in interest, down from 3.36% a year earlier, the financial information website said.

Thomas Lambert, a financial planner at wealth manager Quilter said: “Cash savings rates have been among the few beneficiaries of the Bank’s earlier rate hikes, but they are now under pressure as expectations shift.

“Banks and building societies are typically quick to respond to rate cuts, particularly on easy-access accounts, meaning the top rates may start to slip.

“Fixed-rate savings products may hold up for a little longer as institutions manage existing funding strategies, but the overall trend is clear. Those looking to make the most of their savings may want to consider locking in rates now, while they remain relatively high.

“The broader challenge is that many savings rates are once again falling below inflation, and the erosion of real returns is becoming an issue for households trying to preserve the value of their money.

“Diversification, including a considered approach to investing, may be needed to maintain purchasing power over time.”

The value of investments can go down as well as up.

Jenny Ross, editor of Which? Money, said: “If you’re a saver, now is the time to take stock of your accounts. Banks will likely be swift to cut the interest paid on variable rate accounts, so shop around to make sure your money is working as hard for you as it can.”