Households to have £300 knocked off mortgage payments by end of year

Mortgage payments could drop by £300 by the end of the year for some, it has emerged. Tracker mortgage holders could see monthly savings of around £300 due to the upcoming Bank of England base rate changes, according to forecasts.

Paul Dales, chief UK economist at Capital Economics, said the base rate will most likely stand at 4% by the end of this year, before dropping to 3% in 2025. A mortgage holder with £300,000 left on their 25-year home loan, will currently be paying £1,959 a month based on the average tracker rate of 6.14%.

If the rate falls to 4.48% by the end of the year, homeowners could see their monthly payments drop by £295 to £1,664. Mr Dales continued: “When the bank rate drops, those on variable deals will get the benefit before anyone else, which will be very welcome as they’d have been feeling pain even more so than others.

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“It’s always a bit of a gamble taking one on, but I’d have thought the share of trackers would definitely go up as the Bank Rate comes down. It’s pretty clear interest rates won’t be going up further so anyone who is feeling brave might go for one.”

Peter Stimson, head of Product at mortgage lender MPowered, said: “March’s sharp fall in inflation, and predictions that CPI could reach the Bank’s two percent target by the end of the second quarter, have removed much of its rationale for holding interest rates this high for this long.

“Nevertheless the Bank has shown that it is in no hurry to lower interest rates, and no major rate cuts appear likely until inflation reaches its target level, and stays there. The current consensus is that we could see two cuts to the base rate during the remainder of 2024, potentially three, and starting as early as May – though three might be a stretch if the Bank runs out of road this year.

“But timing is key. We believe interest rate cuts should start sooner rather than later.”