The average tracker mortgage holder is set to save £1,200 a year as a result of the Bank of England’s announcement today.

The institution has announced it is cutting interest rates by 1.5 per cent.

See our graphic to the right to find out how you would benefit if the full cut was passed on

Only people who own a tracker mortgage are set to benefit immediately from the cuts, as those on fixed rate mortgages are unaffected, and those on variable rate mortgages are tipped to wait for some time for changes to filter through.

The Bank of England’s announcement brings interest rates down to the lowest since 1955, at three per cent.

It is the biggest percentage drop in more than 25 years.

People owning a tracker mortgage of £80,000 are set to save £100 a month under the new interest rates.

Managing Director of Financial Advisors Abacus Advice Limited in Sevenoaks Mike Hardy said: “It is going to make a lot of people feel a lot better but for the average mortgage holder it is touch and go whether they will benefit.

“Many banks will be trying to cash in on this cut which is a problem if the Bank of England hopes these cuts will feed through to the consumer.

“If you look over recent weeks some companies have been withdrawing their tracker product ranges and introducing ones with a wider margin to favour the lending institution.

“They did that in anticipation of the rate cuts so they do not have to pass them on to the consumer.

“A lot of people have taken out fixed rate mortgages so they will not benefit either.”

Mr Hardy added: “It is difficult to tell how low interest rates will go in the future.

See how local business leaders have reacted to the base rate cut>>>

"There is a lot of talk in the city of further rate cuts but I would be wary of doing that because there is a fine balance between getting it right and over doing it.

“If we over do it then people will be on the phone to me about the threat of inflation.

“Overall large numbers are going to be a lot better off. Saving £125 a month on a £100,000 mortgage is £1,500 a year. That could pay for a holiday or pay off some bills, which is a big help in these times.”