About 3.6 million homeowners received an early Christmas present from the Bank of England this week. Borrowers with a £150,000 tracker mortgage will save £125 a month on their repayments after the base rate was cut by a full percentage point t 2 per cent.

This is the third month in a row that homeowners on tracker mortgages have benefited from falling rates. The typical borrower has seen repayments fall by £375 since October, as the base rate has plunged from 5 per cent. The cut on Thursday sent the base rate to its lowest level since 1951 and will leave some households paying hardly any interest at all when tracker rates fall on January 1.

For example, last year Lloyds TSB was offering a two-year tracker deal pegged at 1.01 points below the base rate. Borrowers who snapped up the deal will soon be paying only 0.99 per cent interest on their home loans.

Tracker mortgages have become increasingly popular since the Bank of England started to cut interest rates late last year. More than a third of mortgage deals agreed in September were trackers.

However, not all tracker borrowers will benefit from the latest cut. About 600,000 borrowers with deals from Yorkshire, Skipton, Norwich and Peterborough, Chesham and Darlington building societies will have their mortgage rates frozen at the existing level. These mutuals have “collars” in the small print of their loans, which enables them to stop reducing rates once the base rate falls below 3 per cent.

Halifax, Britain's biggest mortgage lender, had a similar threshold in place. However, under pressure from the Financial Services Authority (FSA), the City watchdog, it announced that it will reduce tracker rates after Thursday's cut. It also said that it would pass on all future cuts to homeowners on tracker deals.

The FSA had warned Halifax that its collar was unlikely to be enforceable. The watchdog said that collars could be enforced only if the details were included in a lender's key facts illustration (KFI), the mortgage document given to every borrower. Halifax removed the details of its collar from its KFIs in 2005.

Melanie Bien, of Savills Private Finance, the mortgage broker, says: “Collars go against the spirit of the tracker mortgage, which is supposed to be about transparency. Lenders will be under pressure this week to pass on any rate reduction, particularly as the Government is looking so closely at their actions. The issue of collars and the like could be a real can of worms.”

Many of the other large lenders, including Abbey, Woolwich, the mortgage brand of Barclays, Northern Rock, Royal Bank of Scotland and NatWest, do not have collars on their tracker deals.

A further 10 per cent of households - about 1.1 million - are on deals that are linked to lenders' standard variable rates (SVRs). These borrowers have not fared as well as those on trackers because lenders have more discretion over how much of a rate reduction they pass on.

Last month only a quarter of lenders cut their SVRs by the full 1.5 percentage points.

This time, Lloyds TSB was the first bank to promise to pass on the full base-rate cut to borrowers on its SVR. The rate will fall from 5 per cent to 4 per cent on January 1. It is one of the cheapest rates offered by the bank, but it is not available to new customers.

HSBC has also committed to reducing its variable rate, from 5.44 per cent to 4.44 per cent.

But while the drop in rates is good news for existing borrowers, the outlook for those trying to take out a new home loan is less certain. Lloyds TSB pulled all its tracker mortgages for new borrowers on Wednesday night in anticipation of the base-rate cut, and other lenders are expected to follow suit.

After last month's cut in interest rates almost every big lender pulled tracker deals. When they returned to the market, rates were considerably higher. Lenders also closed the door to all borrowers with a deposit of less than 25 per cent.

With the spotlight on tracker and variable-rate deals, homeowners with a fixed rate may be kicking themselves. Even a best-buy fix taken out three months ago now looks expensive and some homeowners could be tempted to pay an early redemption charge (EDC) so that they can switch to a cheaper tracker.

In theory some borrowers could reduce mortgage bills by thousands of pounds, but it is important to seek expert advice before making such a move. Some lenders charge EDCs of up to 6 per cent on the entire loan.