Northern Rock cuts loan rates again

Northern Rock has cut its mortgage rates for the fourth time in just over a month

Nationalised bank Northern Rock has cut its mortgage rates for the fourth time in just over a month.

The group is slashing rates on 13 of its fixed rate and tracker products, reducing them by up to 0.5%, while it is also launching four new deals.

It was joined by Britain's biggest building society Nationwide, which is cutting the cost of 19 of its mortgages, reducing fixed rate loans by up to 0.31% and tracker ones by up to 0.2%.

The latest round of cuts, which comes after a flurry of lenders reduced their rates during October, is a further sign that competition is returning to the mortgage market.

Among the cuts being made by Northern Rock is a 0.1% reduction to its two-year tracker for people borrowing up to 70% of their home's value who pay a £595 fee. The new rate of 2.59% puts it at the top of the best buy tables for two-year variable rate deals.

Northern Rock also announced it was launching a range of tracker products for people looking to borrow up to 80% of their home's value.

The Government-owned group has to operate its mortgage range within the constraints of its self-imposed competitive framework, under which it is limited to writing 2.5% of new mortgage lending.

Last week European officials approved Government plans to split Northern Rock into a good and bad bank, with the good bank sold back to the private sector. When this happens the group will be restricted from offering rates that appear in the top three slots of Moneyfacts' best buy tables for fixed rate and tracker deals.

On Wednesday the group said it had lent £1 billion in the three months to September and £2.3 billion for the year so far. It originally planned to lend £5 billion this year but will now not hit this target. It hopes to meet its £9 billion commitment next year.

Abbey later said it had cut rates on its fixed rate and tracker mortgages by up to 0.3% for people borrowing 70% and 75% of the value of their home. The group also launched two new two-year fixed rate mortgages, as well as a market leading fee-free three-year fixed rate deal of 5.99% for existing current account customers with only a 10% deposit.