Two lenders cut mortgage rates

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Royal Bank of Scotland, which includes NatWest, is reducing a number of its fixed-rate loans by between 0.35% and 0.6%, while Abbey is shaving 0.15% off its three-year deal for people with a 25% deposit to give a new rate of 5.39%.

The move follows a sharp drop in swap rates, upon which fixed rate deals are based, prompting speculation that other lenders will follow suit and also reduce their rates in the coming weeks.

Two year swaps have fallen by nearly 1% during the past month from 5.61% on September 23 to 4.63% now.

Katie Tucker, technical manager of Mortgageforce, said: "Swap rates have been lower for a couple of weeks now and are 1% lower than they were a month ago. Lenders will be able to offer lower rates a result of this and they are likely to take the opportunity to bring in lower risk business."

The reduction by Royal Bank of Scotland will leave a five-year fixed rate deal for someone with a 25% deposit at 5.74%, while rates for people with only a 5% deposit have been reduced to 6.64%.

The group has also halved some of its arrangement fees from £999 to £499.

Meanwhile Alliance & Leicester is pulling its range of two-year tracker mortgages after being inundated with demand.

The group said it was removing its two-year tracker loans from the close of business, although it plans to replace them in due course.

It had been offering a rate of 5.39% for people borrowing 25% of their home's value and paid a 1% arrangement fee, putting it near the top of the best buy tables.