At last: Banks act fast on mortgage cut

Within seconds of the Bank of England announcement, Halifax, Abbey, Royal Bank of Scotland/NatWest and the Nationwide building society said they would cut standard variable rates by 0.25 per cent.

Lloyds TSB, Barclays, HSBC and first direct had already said they would mirror the Bank's decision.

A family with a £200,000 mortgage should be £32 a month better off. The big banks acted after coming under attack for failing to pass on previous cuts in full.

The Bank of England's monetary policy committee cut the base rate from 5.5 per cent to 5.25 per cent today.

But there was also a grim warning that economic conditions are getting worse. In a statement released at the same time as the cut, the Bank said there were dangers of slower growth or higher inflation: "Business surveys suggest that further slowing is in prospect. These developments pose downside risks to the outlook for inflation."

Shadow chancellor George Osborne said the overall economic news looked tough. "Given the gloomy economic news and the rising cost of living, millions of homeowners who are struggling thanks to Brown's economic incompetence will welcome this news," he said.

Gordon Brown has said lenders have a "duty" to pass on interest rate cuts to borrowers.

Typical homeowners could now see their variable mortgage rate fall to 7.25 per cent, cutting the cost of a £100,000 mortgage by about £16 a month to £722.80.

Londoners with a big £250,000 loan could save £40 a month to counterbalance rising spending on petrol, gas and electricity bills. Oil prices surged to record highs this year and power firm E.ON today became the latest to increase gas and electricity prices. Today's rate cut was in line with City expectations but a disappointment for those hoping the Bank would opt for a full half-point cut to five per cent. The US Federal Reserve slashed American rates by 1.25 per cent in less than two weeks in an attempt to stave off a recession.

In Britain, the nine-strong monetary policy committee made its move after signs the housing market is cooling amid a global credit crunch. In its statement it said both families and firms were feeling the pinch: "The prospects for output growth abroad have deteriorated and the disruption to global financial markets has continued. In the UK, credit conditions for households and businesses are tightening.

"Consumer spending growth appears to have eased."

The Bank said it was trying to strike a balance between risking a sharp slowdown and being too soft on abovetarget inflation. The pound edged down during the morning after industrial output showed another fall. Liberal Democrat t reasury spokesman Vince Cable said: "This is welcome news for the many people who have found themselves overstretched and struggling to meet mortgage and loan repayments.