Cheaper rates will be music to the ears of homebuyers and people remortgaging, but those with lower deposits are still seeing the smallest cuts.
Read on to find out how lower rates are impacting mortgage repayments, and whether the experts think the base rate will fall again this month.
What's happened to mortgage rates since the base rate cut?
Mortgage rates have dropped significantly over the past couple of months, with the cheapest five-year deals at 60% loan-to-value (LTV) now below 4%. These are some of the lowest rates recorded in nearly two years.
Borrowers with small deposits being left behind
Much of the competition has focused on borrowers with bigger deposits of 25%-40%.
The cheapest two-year fix at 60% LTV has fallen by 0.34pp since August's base rate cut, while the cheapest five-year deal at 75% has dropped by 0.30pp.
What difference do the cuts mean for your repayments?
Falling rates are a good thing for borrowers, but it can be difficult to quantify the impact that cheaper rates have on monthly repayments.
We've analysed the deals with the biggest and smallest price drops to provide examples of the real savings you might make.
The figures below will vary significantly depending on your circumstances, but they provide a broad indication.
Biggest price drop: two-year fix at 60% LTV
The cheapest two-year deal at 60% LTV has fallen by 0.34pp since 1 August, from 4.41% to 4.07%.
Let's say you're looking to buy a house for £300,000, borrowing £180,000 at 60% LTV, on a 25-year term.
At the previous market-leading rate of 4.41%, you could expect to pay around £1,000 a month. At the current rate of 4.07%, you'd pay around £955 – a saving of £45 a month, or nearly £1,100 over two years.
Smallest price drop: two-year fix at 90% LTV
The cheapest 90% deal has dropped by just 0.04pp since the base rate cut, from 5.19% to 5.15%.
Let's assume you're buying a property for £200,000, borrowing £180,000 at 90% LTV on a 25-year term.
We've calculated that your repayments would be around £1,072 at 5.19%, or £1,068 at 5.15%.
In this scenario you'd save less than a fiver a month, which might just about stretch to a pint – if you choose your pub wisely.
Find out more:Will the base rate drop again this month?
If you're thinking of moving home or are coming up to remortgage, you'll probably be hoping for another cut in the base rate this month.
The next announcement is due at midday next Thursday (19 September), but the most likely outcome at this point is that the base rate will be held at 5%.
David Hollingworth, of the mortgage broker L&C Mortgages, says: 'The Bank was quick to try and temper expectations of cuts coming thick and fast, so it may be a little overoptimistic to expect another reduction in September.
'We should also remember that the recent cut was a split decision, with four of the nine members preferring to hold the rate at 5.25%. Nonetheless, the hope will now be that another cut will come before the end of the year.'
What's next for mortgage rates?
Whatever happens next week, experts anticipate that mortgage rates will continue to drop in the medium term.
However, it's highly unlikely we'll see a return to the sub-2% rates recorded a couple of years ago anytime soon.
Nicholas Mendes, broker at John Charcol, says: 'If next week's announcement is a hold, it will likely slow the recent decline in rates rather than cause them to reverse in the opposite direction.
'Looking ahead to 2025, mortgage rates are expected to fall further, likely by around 0.5%. This decline will be driven by ongoing base rate cuts and stabilising economic conditions.
'As confidence in the economy improves and inflation remains controlled, lenders will have greater flexibility to offer competitive rates.'
Find out more:The latest on mortgage rates and house prices
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