One of Britain’s largest mortgage lenders has lowered its highest lending rate in a radical overhaul of how it charges borrowers.

Borrowers coming to the end of their existing fixed-rate deal are normally moved to the lender’s “standard variable rate”. For Santander this is currently 4.74pc.

However, these borrowers will now instead move onto a “follow-on rate”, which is set at 3.25 percentage points above the Bank of England Bank Rate – currently 3.75pc.

For someone with £150,000 outstanding this will save them £83 a month on their mortgage payments.

Graham Sellar, from Santander, said: “It became obvious to us that customers didn’t really understand what a standard variable rate was, but people seem to know the Bank of England base rate.”

Anyone taking out a loan after January 23 this year will automatically be moved to the new rate at the end of any fixed-rate deal. Mr Sellar said that most borrowers who are currently paying the standard variable rate will be offered the chance to switch immediately.

Aaron Strutt, of brokers Trinity Specialist Finance, said the new rate will be appealing for customers who may run into financial difficulties and be unable to remortgage, but customers should always start researching new deals three months before their fixed-rate deal expires.

Some experts are predicting as many as three hikes of Bank Rate this year, which would increase Santander’s new tracker to around the current level of its standard variable rate, although this too would also rise with interest rates.

Some borrowers will be excluded from the new rate, however. Anyone who has missed a payment or been in arrears for the past 12 months will remain on the standard variable rate.

This means Santander’s army of so-called “mortgage prisoners” – those who are stuck on the standard variable rate and unable to switch to a better deal – could miss out.

Tim Coates, 45, is a mortgage prisoner who has been paying Santander’s highest rate for eight years.

He took out an interest-only mortgage to buy his £650,000 home in 2007, but when his two-year fix expired he was moved onto the standard variable rate and repeatedly told he could not be moved onto a cheaper deal, despite his animation company turning over £750,000 a year.

He estimates he has paid more than £100,000 in additional payments.

But mortgage prisoners like Mr Coates argue that the high mortgage rates they are being charged are the reason for their missed payments.

Mr Coates said the standard variable rate now seemed to be a “punishment rate” for those who had missed a payment or were in arrears.

“It’s another kick in the teeth for mortgage prisoners. It’s almost as though they have spotted an opportunity to appear to be giving a big reduction, when the base rate could be about to rise,” he said.

Mr Sellar said: “Anyone who is suffering financial difficulty because of a life event should contact us. We have a team of people who will try to help and we can offer variable rates.”