The UK's two biggest mortgage lenders announced yesterday they would pass on savings from last week's interest rate cut to borrowers.

Abbey National said it would cut its Standard Variable Rate (SVR) by the full 0.25 per cent but Halifax, the country's biggest mortgage lender, is passing on only 0.15 per cent.

But Halifax customers on tracker mortgages - whose rates follow external factors such as the Bank of England's rate - will receive the full 0.25 per cent cut.

The Bank announced last Thursday it was cutting the cost of borrowing from 3.75 per cent to a new 48-year low of 3.5 per cent.

Halifax cut its SVR by 0.1 per cent in February when the Bank last trimmed the cost of borrowing by 0.25 per cent.

Its new rate of 5.5 per cent, which comes into effect on August 1, is still slightly lower than Abbey National's, which falls to 5.54 per cent.

Meanwhile Nationwide, whose SVR currently stands at 4.64 per cent, said it was monitoring the market to ensure it retains its competitive edge.

Yesterday's cuts follow announcements last week by Barclays and its subsidiary the Woolwich, Sainsbury's Bank, Cheltenham & Gloucester and The One Account, who have all passed on the full 0.25 per cent to customers.

SVRs are used to set the price of fixed-rate mortgages.

While new fixed-rate customers are usually given a lower rate for an introductory period, once that expires the SVR is used to determine how much they will pay afterwards.

Former building society Northern Rock later announced that it was cutting both its SVR and its loyalty rate by 0.2 per cent.

Its SVR will fall to 5.49 per cent from August 1 while the loyalty rate, which applies to customers who have been with the bank for more than seven years, is reduced to 5.24 per cent.

Sales and marketing director Andy Kuipers said: "With our SVR at its lowest level since the mid-Fifties, this is good news for borrowers.

"However, we are mindful of the impact this has on savings rates which are now under review."

Tuesday July 16, 2003