Abbey has become the latest bank to cut its fixed rate mortgages as the cost of wholesale funding continued to ease. The group is reducing the cost on two- and three-year fixed rate deals by up to 0.15% from Monday – the lender's second cut in 10 days. Abbey said it had made the reductions following an easing in swap rates, upon which the deals are based.

The news comes the day after Barclays' lending arm The Woolwich cut the rate of its lifetime trackers by 0.1% and its fixed-rate products by up to 0.3%. Other lenders have also made reductions in the past week.