With most lenders, the average borrower with a pounds 60,000 repayment mortgage will now pay pounds 49.17 a month less than when rates peaked in June. In annual terms, the saving will be more than pounds 220.
Halifax, Woolwich, NatWest and Yorkshire Bank all cut their variable interest rates by half a point and promised to charge borrowers 7.7 per cent from 1 January. Rates at Abbey National dropped from 8.1 to 7.6 per cent.
Staying ahead of the converted former building societies, Nationwide also cut its rate by half a point to just 7.2 per cent.
The cheapest rates on the market are now below 7 per cent for the first time in two years. Borrowers who have held loans with Coventry Building Society for more than five years will pay just 6.95 per cent. But fixed- rate deals still remain cheaper. In some cases borrowers can pay as little as 5 per cent for a five-year fixed rate mortgage.
The Council of Mortgage Lenders yesterday welcomed the latest cuts, describing them as a welcome early Christmas present for the housing market. "We are pleased to see the benefits of lower rates feeding through to homeowners sooner rather than later," said a spokeswoman.
However, some lenders, including Midland Bank, decided to delay making a decision to lower their rates. Portman Building Society said it would cut its rates, did not specify by how much. "We are delaying our decision on the level of reduction as we are concerned about the expectations of our savers," said a Portman spokesman.
Lenders said they expected further rate cuts next year, bringing rates to their lowest level since the late 1980s. Mortgage experts are even warning that some borrowers may fail to benefit from future rate cuts because of built-in interest-rate "minimums".
Nick Deutsch, managing director of the specialist lender First Mortgage, said: "Borrowers should check whether they have a minimum interest rate built into their contract. It may have seemed so remote when they took out the loan that it may not have been discussed."
savings from lower rates
Monthly payments on a pounds 60,000 repayment mortgage (25-year term) at standard variable rate
Lender This month Next month Saving
Halifax pounds 455.92 pounds 437.19 pounds 18.73
Abbey National pounds 452.03 pounds 433.37 pounds 18.66
Nationwide pounds 438.13 pounds 419.79 pounds 18.34Reuse content