Rate cut boosts homeowners
More than five million homeowners have been boosted by an unexpected 0.5% cut in UK interest rates to 4.5%.
About 4.2 million households who have a tracker mortgage will automatically benefit from the reduction in the official cost of borrowing.
Meanwhile a further 800,000 on standard variable rates (SVR) could also see their repayments fall after several major lenders passed on the cut.
Halifax, Lloyds TSB, which also lends through Cheltenham & Gloucester, and Barclays's mortgage arm the Woolwich are cutting SVRs by the full 0.5%.
NatWest and Royal Bank of Scotland also said they will cut their SVRs, in line with the 0.5% reduction.
Most other lenders are likely to follow suit after the Government unveiled a £500bn bank bail-out but called on banks to support lending to homeowners.
If lenders do pass on the cut in full, it will knock about £47 off monthly repayments on a typical £150,000 loan, reducing monthly payments to £1,012.81.
This will save customers about £570 a year based on a new rate of 6.5%.
The base-rate cut, which was part of a co-ordinated action by central banks around the world, leaves the official cost of borrowing in the UK at 4.5%.
Michael Coogan, of the Council of Mortgage Lenders, said: "The package of bank funding and capital measures is further strengthened by this rate cut.
"All this decisive action augurs well for an improving market situation looking ahead."
Louise Cuming, at Moneysupermarket.com, warned: "This is not a magic cure-all and we will not see either the mortgage or the housing market bouncing back to where it was 18 months ago.
"Sadly, too much water has passed under that bridge to be ended by a quick fix.
"Lenders will not change their strict attitudes to risk just yet and the cut may not filter through to rates for new borrowers and first-time buyers."
About 11.7 million UK homes have a mortgage, with 56% on fixed-rate deals and the rest on variable-rate loans.
Analysts Defaqto said margins on tracker mortgages are now up to 1.07% higher than they were in July 2006 when the base rate was last at 4.5%.
However swap rates, upon which fixed- rate deals are based, have fallen sharply recently suggesting the cost of fixed-rate mortgage deals could fall.
Ray Boulger, at broker John Charcol, believes borrowers should be aware interest rates could yet fall further.
"It is still too soon to buy a fixed- rate deal and we recommend trackers, preferably with a droplock option, allowing borrowers to move to a fixed-rate loan when they want.
"For borrowers needing fixed-rate security, it might be worth delaying an application until rates lower."
It is not all good news in the mortgage market at the moment as Bristol & West has said it is increasing the cost of its fixed-rate mortgages.
Cheltenham & Gloucester also pulled its mainstream tracker products for people borrowing up to 90% of a homes' value.
And Halifax has changed the terms on its SVR mortgage, stating that the rate will now be within 3% of the bank's base rate, rather than 2%.