Abbey 'will not pass on cut in rates'

Abbey National, the second-largest mortgage lender, yesterday produced the first evidence that the end to the mortgage war might be in sight when it warned it was unlikely to reduce its lending rates in line with a further cut in the Bank of England's base rate.

Janet Connor, Abbey's director of retail marketing, said money saved by not cutting mortgage rates would be used to help savers. Many saving customers have literally paid for banks' cut-throat competition on the mortgage side by seeing their returns on savings balances eroded by more than this year's fall in interest rates.

Rather than bringing down the returns on savings rates by 25 basis points in line with a possible cut by the Monetary Policy Committee today or in the near future, Abbey will reduce savings rates by between 10 and 14 basis points. The lender said it would cut mortgage rates by the same amount.

The bank, which has 2 million mortgage customers, has slashed its mortgage rates along with rivals this year to their lowest levels in more than 30 years.