Homeowners advised to make the most of the rate cut

Financial advisers were today urging homeowners to shop around for a better mortgage deal, following today's surprise interest rate cut.

Towry Law mortgages said borrowers could save as much as 20% on their monthly repayments by remortgaging.

"For homeowners, the newly-appointed governor's generosity will immediately help deepen the pockets of borrowers on tracker deals. However they should double-check if any potential floor rates exist within their terms," said Simon Holdsworth of Towry Law.

"The picture may not be as rosy for those on discount and variable rates - while some lenders are committed to an immediate full rate cut to their standard variable rate mortgages, many other lenders will not be so generous."

Mortgage broker Charcol estimates that three-quarters of homeowners who have not yet remortgaged could save ?4.1bn between them over the next year alone by doing so

Yet it said its recent research shows that 50% of UK adults have no idea that interest rates and inflation have been falling over the last decade.

"The margin between the standard variable rate and the lowest variable pay rates available is much higher today than when the base rate was at its 1990s peak. So there is much more of an incentive to shop around for the best rate," said Charcol's senior technical manager Ray Boulger.

"Right now, base rate tracker deals offer the best value overall for those borrowers who prefer a variable mortgage, especially with the likelihood of further rate cuts to come - but beware of those lenders imposing an onerous collar, which conflicts with the object of the tracker concept."

So far, the lenders to pass on the rate cut to their customers are Sainsbury's Bank, The One account and the Woolwich. All are passing on the full 0.25% cut to holders of their standard variable rate mortgages, meaning their rates now stand at 4.45%, 4.7% and 5.54% respectively. The Woolwich and The One account have cut their rates as of today, while Sainsbury's Bank's cut will come into effect on August 1.