Millions of homeowners will pay more for their mortgages next year despite the Bank of England’s decision to cut the base rate yesterday.

Only borrowers who are on the right type of mortgage deal will enjoy lower bills following the quarter-point cut. But many will have to find extra cash to meet their monthly repayments as lenders try to boost their profit margins in the wake of the credit crunch.

Around 12 per cent of homeowners who have a tracker deal – which moves in line with the base rate – will enjoy a cut in their mortgage repayments. The average homeowner could see repayments fall by £18 a month.

But borrowers on other variable rate deals may not be so lucky, as they depend on their lender passing on the rate cut.

Halifax, Nationwide and First Direct said yesterday that they would do this, but some other banks may not.

James Cotton, of London & Country, the mortgage broker, said: “We are bound to see some lenders dragging their feet and others who don’t pass on the cuts at all.”

The real losers are homeowners who have fixed-rate mortgage deals. About 1.4 million borrowers coming to the end of a fixed-rate deal in 2008 face much higher repayments after five interest rate rises since August last year.

Those hoping that yesterday’s base rate cut would take the sting out of the soaring repayments are in for a disappointment. They may be forced to find more than £100 extra each month to meet their bills.

Experts say that banks and building societies, which face a £30 billion black hole in their mortgage funding next year, are changing the way they price fixed-rate home loans so that lower interest rates will no longer automatically result in cheaper deals for homeowners.

Lenders have traditionally reduced the cost of fixed-rate deals in line with falls in swap rates – the money markets that predict movements in the base rate. But recently fixed rates have fallen more slowly than swap rates.

Melanie Bien, director of Savills Private Finance, the mortgage broker, said: “Lenders have introduced quite a margin between the cost to them of borrowing and the price they are charging borrowers for it. It is likely that lenders will continue to attempt to improve margins by keeping fixes high, relative to swap rates.”

In an additional blow to borrowers, lenders are also boosting their margins by charging higher arrangement fees for setting up a home loan. Five years ago the average arrangement fee for setting up a two-year fixed-rate loan was around £200. Now lenders are charging as much as £4,500 to set up a £150,000 mortgage.

Experts say that the high fees can be used to camouflage uncompetitive deals as lenders charge low interest rates, but recoup extra profit by levying a high arrangement fee.

Mr Cotton says that borrowers who take out Halifax’s two year fix at 5.29 per cent, which charges a fee of 3 per cent of the value of the loan, are paying an effective interest rate of 6.79 per cent.

There are also fears that borrowers who cannot afford the high fees are storing up trouble for the future by rolling the charges into their mortgage. This means that they must pay interest on the fee and any subsequent fees, which could add years to the term of their loan.

Ray Boulger, of John Charcol, the mortgage broker, said: “Borrowers need to remember that they may be paying interest on the fees if they add it to their mortgage. But the important thing is that borrowers have a mortgage at a rate they can afford to repay.”

The Government is trying to encourage homeowners to take out long-term fixed-rate home loans for up to 25 years to help to stabilise the mortgage market. Brokers are reporting that five-year fixes have become more popular than two-year fixed rates over recent months. However many homeowners balk at the prospect of long-term arrangements which can carry hefty redemption charges if borrowers later decide to move house or improve their home.

Savers, who are usually penalised when the base rate falls, may emerge unscathed, experts say. As banks try to shore up their deposits they are unlikely to pass on the full rate cut to all savers. Financial advisers believe that banks which cut some savings rates may even increase the returns on other accounts in an attempt to boost their market share.

Losers

Victoria Jones and Mike Reddy, of Cwmamam, Wales, pay 4.84 per cent interest on their £145,000 mortgage from Nationwide. But they face an increase in mortgage payments when their deal runs out in July.

They currently pay £890 a month in mortgage repayments, but the best five-year fix on the market is now pegged at 5.39 per cent, which could take their repayments up to £988 a month.

Ms Jones said: “This cut won't make any difference to me unless rates continue to fall quite considerably before next summer. If there are cuts I think Nationwide will follow suit. I am worried that people will go out and spend excessively over Christmas now that the Bank of England has made this cut, which could mean the Bank is less inclined to make more cuts in the new year.

“It will help retailers in the short term but it probably won't help me in the long term."

Winners

Christine Cole, of Bury St Edmunds, has a £30,000 offset mortgage on her three-bedroom home at Yorkshire Building Society at a standard variable rate of 6.5 per cent. She is confident that the lender will pass on yesterday’s interest rate cut in full so her payments will fall. The 53-year-old office manager pays £270 a month, including a £55 overpayment. She said: “If my rate drops, I'll continue to pay the same and my cash will go further. I think the rate cut is a good sign.”

Barbara and Mark Richards will pay £18 a month less on their mortgage repayments from today. The couple pay £749 a month on their Woolwich Lifetime tracker mortgage, which is pegged at 0.19 percentage points above the base rate. The rate has now fallen from 5.94 per cent to 5.69 per cent. The couple, who live in a three-bedroom cottage in Nottingham, say they are pleased that they opted for a tracker mortgage, which had a better rate than a fixed or discounted deal.

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