Last week the Base Rate was reduced from 5% to 4.75% in a move aimed at making borrowing cheaper.
Whilst those on fixed rates will see no change to their mortgage rate as they have locked into set price, borrowers on tracker mortgages should see their rate go down accordingly. This is because these mortgages have variable rates which adjust in line with the Bank of England (BoE) rate.
But last week it emerged Santander customers on tracker mortgages would have to wait until 28 December at the earliest to see their rate reduce.
Meanwhile, we heard through a broker that another lender – Accord Mortgages – does not routinely pass on reductions to the BoE base rate immediately.
It said customers would have to wait until March 2025 to see the adjustment to their payments, unless they proactively requested a recalculation online.
Nick Mendes, mortgage technical manager at John Charcol, said whilst it was expected borrowers will see the impact of base rate cuts immediately on their tracker, this was not always the case.
“Typically, a tracker mortgage adjusts shortly after the Bank of England changes the base rate,” he said.
“However, the timing depends on the terms and conditions set by your lender. While many lenders apply changes almost immediately, others may include clauses that delay these adjustments, leaving borrowers to pay outdated rates for longer periods.”
Some brokers think it’s unfair, particularly as they feel lenders are often quicker to pass on Base Rate increases.
Rohit Kohli, director at The Mortgage Stop said: “Borrowers will expect that when savings are made available via a Bank of England rate cut, they’re passed on promptly, not at the convenience of the lender.
“When rates go up, lenders seem to pass on the increase to borrowers almost instantly. But when rates drop, as we’ve seen with the recent Bank of England cut, passing on the savings takes much longer.
“Santander tracker customers, for instance, won’t see their rates fall until late December—almost seven weeks after the rate cut. While this might be standard practice, it raises questions about fairness and whether lenders are truly acting in the spirit of Consumer Duty.”
What tracker mortgage borrowers should do next
So, what should tracker mortgage borrowers do to ensure they gain all the financial benefits of interest rate cuts?
Mendes suggested several steps, beginning with reviewing the terms of your mortgage agreement to understand the details on rate adjustment timing.
“If you are unclear,” he said, “contact your lender to clarify policies regarding payment changes, particularly during periods of falling rates.
“For lenders like Accord, borrowers should act proactively and request payment recalculations immediately after a rate reduction. Sharing this information with others is also valuable to help them avoid unnecessary costs.
“Tracker mortgages offer flexibility and cost-saving potential, but understanding the small print is essential”.
He added: “By staying vigilant and proactive, you can ensure you’re fully benefitting from your tracker mortgage.”
