Halifax and Abbey National, with about 3.5 million borrowers between them, announced they were cutting the cost of their variable interest mortgages by 0.26 per cent to 6.99 per cent, the lowest for more than 30 years.
Bradford & Bingley, whose headline rate already stood at 6.99, said it would drop the cost of its mortgages by a further 0.25 per cent, while Alliance & Leicester and most other mortgage lenders hinted they too would follow the bigger players.
The decision by Halifax and Abbey National cuts monthly payments on a typical pounds 50,000 interest-only mortgage from about pounds 275 to pounds 265, a saving of pounds 10. Repayment-style mortgages will be cut by pounds 7.40.
Nationwide, which has a million borrowers, said it had no immediate plans to cut mortgage rates below its market-beating low of 6.74 per cent.
However, Halifax's new rate will be delayed until 1 August for existing borrowers, while Abbey National said yesterday that its borrowers would only benefit from 1 September.
Abbey blamed the delay on the problem of integrating its computer system with that of National & Provincial Building Society, which it is in the process of taking over.
Savers were warned yesterday that the amount paid on their deposits was likely to fall further in the wake of the base and mortgage rate cuts.