Abbey cuts mortgage rates

Abbey National today became the second major lender to reduce its mortgage rates following last week's interest rate cut.

The bank has cut its standard variable rate by 0.15% to 5.79%. The cut comes into effect immediately for new customers and from early March for existing ones.

Last Friday Halifax announced it would be passing on 0.1% of the quarter-point cut in interest rates to borrowers, taking its standard variable rate from 5.75% to 5.65%. All the other lenders in the HBOS group - Bank of Scotland, Intelligent Finance, Birmingham Midshires and the Mortgage Business - also reduced their rates by 0.1%.

But other mortgage lenders appeared to have been caught by surprise by the Bank of England monetary policy committee's decision to cut rates to 3.75%, and most are still reviewing their rates.

The One account, formerly the Virgin One account, and Sainsbury's Bank bucked the trend, declaring on the day that the interest rate cuts were announced that they would be passing on the full 0.25% reduction to borrowers.

Earlier this week Intelligent Finance said it would be cutting its savings rates by 0.1%, but building society Leeds & Holbeck said it would be keeping rates unchanged for its 600,000 savers until at least April 1. The society has not yet made a decision on whether it will cut rates for borrowers.