For the second time this year, the Bank of England has announced a cut to its base rate for interest. Dropping by 0.25%, it now stands at 4.75% - the lowest it's been in over a year.

But what does this mean for mortgages?

The base rate set by the Bank of England directly influences the interest rates charged by mortgage providers, so this drop signals potentially favourable conditions for borrowers. Homeowners with variable mortgages will see an almost immediate reduction in their monthly payments, as these types of loans are tied to the base rate. For those on standard variable rate (SVR) mortgages, lenders may pass on some of this reduction, although the extent can vary.

However, borrowers currently on a fixed-rate mortgage won't see an immediate change in their payments until their deal ends. As they come to review or remortgage, they might find better rates than a few months ago, but with caution: mortgage rates are still higher than the low rates seen in 2020 and 2021. This means that, while the base rate drop may ease some financial pressure, the average household still face increases when switching from their current fixed rate. According to Bank of England research, the average household could still expect their monthly payments to rise by approximately £180.

Prospective homebuyers may find this a slightly more encouraging time to secure a mortgage, but should still weigh options carefully. The market remains in flux, and while lower rates are welcome, affordability calculations and lender criteria are critical factors to consider.