While the Bank of England has been slow to reduce its Bank Rate, mortgage rates have been slowly edging down, with a number of lenders bringing sub-4pc fixed deals to the market – and it looks as though cheaper deals will be remaining for the time being.

The Bank of England voted today (August 7) to reduce its headline rate to 4pc, despite inflation rising to 3.6pc in June.

Here, Telegraph Money explains what the current economic outlook means for your mortgage – and whether now is a good time to get a fixed deal.

Are interest rates coming down?

What is happening to mortgage rates?

Is now a good time to fix?

How long should I fix for?

Should I lock in a new mortgage deal early?

Interest rates have been cut three times so far this year, bringing the Bank Rate down to 4pc. There could still be one more cut before the end of 2025, but experts are split on whether this will materialise. The Bank of England will be keeping a close eye on any further inflation rises.

Inflation measured 3.6pc in June, rising more than expected from May’s rate of price growth. It’s significantly above the Bank of England’s 2pc target.

George Brown, senior economist at Schroders, said: “Today’s rate cut is no surprise, but the path forward is anything but clear.

“Nervousness about the labour market might prompt another cut in November. But this will be difficult to justify unless disinflation is clearly underway. As such, we think there is a decent chance rates will not fall below the current rate of 4pc this year.”

Already pricing in further rate cute, most major lenders now offer rates below 4pc. Currently, Lloyds Bank is leading the market with a rate of 3.69pc for borrowers needing a 40pc loan.

Thomas Lambert, financial planner at Quilter, said: “Today’s rate cut is likely to bring a sense of cautious relief to borrowers, particularly those approaching the end of fixed-rate mortgage deals taken out during the peak of the rate-hiking cycle.

“With the Bank Rate now at 4pc, lenders may start to reflect the lower cost of funding in new deals, but changes are unlikely to be immediate or uniform across the market.

“Markets currently expect the Bank to cut rates once more this year, potentially taking the base rate to 3.75pc by year-end. But progress is likely to be slow and data-dependent, meaning those making major borrowing decisions should continue to plan on the basis of a more elevated interest rate environment.

“At the same time, two-year fixed rates are dipping below those for five-year fixes, as it has become cheaper for lenders to fund shorter-term deals, and they are now passing that on to borrowers.”

At the time of writing, the average two-year fixed mortgage rate is 5pc, according to analyst Moneyfacts. The average five-year rate is 5.01pc.

At the time of writing, fixed rates are hovering just below 4pc, with the lowest deals on offer for borrowers with the largest deposits or stored up equity.

Mark Harris, chief executive of mortgage broker SPF Private Clients, said: “Swap rates continue on a downwards path with lenders reducing mortgage rates in recent weeks and a plethora of sub-4pc deals now available.

“This latest rate reduction was largely expected and has been factored into pricing already. However, it’s not just pricing that is improving as lenders are also broadening policy, including increasing loan-to-income caps and lowering some income requirements, which is boosting affordability.”

Adrian Anderson, of Anderson Harris mortgage brokers, said: “The mortgage fixed rates that banks offer are very reactive to the markets hence the situation can change quickly either way.

“I advise my clients to take action sooner rather than later, as most lenders will allow you to switch the rate on your mortgage offer to a cheaper product if one becomes available before the mortgage has drawn down.”

Meanwhile, tracker mortgages – which are directly linked to the Bank Rate – could be the right choice for some people, particularly as further reductions are expected later this year. The average tracker mortgage rate is currently 4.92pc, according to Moneyfacts.

The benefits of a tracker mortgage are that they are transparent, you can make the most of Bank Rate reductions and there’s no early repayment charges if you decide you want to make the switch to a fixed-rate deal. However, rates will also go up with any Bank Rate increases, and you might not end up with the cheapest deal.

Aaron Strutt, of brokerage Trinity Financial, said: “If you have been thinking about coming off of a tracker rate and switching for a fix, then you might as well wait a bit longer and see if rates reduce a bit more, especially if you can afford to take the risk.

“Most borrowers take trackers for the flexibility, many of them do not have early repayment changes and have ‘switch to fix’ options when they can take a fixed rate with their existing lenders without being penalised.”

However, it’s not for everyone.

Mr Anderson added: “Switching on to a variable tracker rate in the hope that fixed rates will continue to reduce is a high risk strategy because you will likely be paying a higher ‘pay rate’ on the variable rate now compared to current fixed rates, and there is no guarantee that the fixed rates will continue to reduce. You may end up paying multiple product fees if you switch rates on a regular basis hence do factor in this ‘cost’.”

It is important to remember that the lowest interest rates do not necessarily equate to the best deal. High fees can sometimes outweigh marginal savings on similarly priced interest rates.

This depends on a lot of factors, including your need for bills to stay the same for the long term, your likelihood of moving and the economic outlook when you choose a deal.

Most common fixed-rate deals last for two and five years. While five-year deals can give you certainty over the longer term, you run the risk of being stuck on an overpriced rate if borrowing becomes cheaper during the term of the loan – but if rates rise during that time, then you’ll be protected.

Alice Haine, personal finance analyst at BestInvest, said: “Most borrowers are signed up to fixed-rate mortgages, so for anyone nearing the end of their product’s fixed-rate term now, a rate cut presents them with a tricky decision: should they secure another fixed-rate deal or take a punt on further interest rate cuts, which could mean a tracker might work out best over the longer term?

“The good news is that the average two-year fixed rate is now dipping below five-year fixes for the first time since September 2022, so borrowers can snap up a short-term solution if they want to see which way rates go from here.”

Nicholas Mendes, of John Charcol mortgage brokerage, said: “It really comes down to personal circumstances and how much certainty someone wants. If you’re confident in your income and plan to review things in a couple of years, a two-year deal might be a sensible option, especially as those rates are currently slightly lower. It gives you flexibility and the potential to benefit from falling rates in the near future.

“However, if you value stability and want to protect against the risk of future rate rises, a five-year fix offers more peace of mind. It may be a touch more expensive now, but it can save stress later on.

“For most people, speaking to a mortgage broker to weigh up the options based on their individual plans and finances is a smart move.”

If you need to remortgage in the next three to six months, it may be possible to secure a new mortgage deal early, which will still be valid by the time you need to actually make the switch.

However, some lenders have reduced the length of their “lock-in period” for loan offers, so be sure to check how long you’ll have to ditch and switch if you see a better offer elsewhere.

Locking in a new deal now – whether it’s for a tracker or a fixed-rate – may shield you in case of any unexpected rate rises. After all, if the past couple of years have taught us anything, it’s that the mortgage market can turn in a very short period of time.

Mr Mendes said: “The most important step is to check when your current mortgage deal ends and understand your options well in advance. If your fixed or discounted rate expires in the next six months, now is the time to start reviewing the market. The earlier you begin the process, the more flexibility you will have to find the right product and avoid unnecessary costs.”

Having a new mortgage lined up ahead of time will also save you from spending any time on your lender’s standard variable rate (SVR), which will almost certainly charge far more interest than any fixed or tracker options. Currently, the average SVR rate is 7.58pc.

It’s a good idea to speak to a mortgage broker to assess your options before making any firm decisions. If you’re concerned about whether your budget will be able to stretch to higher mortgage costs, talk to your lender.

Sam Richardson, deputy editor of Which? Money, said: “Mortgage lenders are obliged to offer support to their customers, so those struggling to meet mortgage payments should speak to their lender about what help is available. Doing so will not affect your credit rating.

“Further support may come in the form of temporary break from payments, interest-only repayments or extending the term of the mortgage.”

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