RBS is reducing a selection of its fixed rate mortgage deals by between 0.60% and 0.35%, while Abbey is shaving 0.15% off its three year fixed rate, offering 5.39% to borrows with a 25% deposit to put down.

The reductions by RBS mean that the interest rate on a five-year fixed-rate mortgage deal for someone with a 25% deposit will be 5.74%, while rates for people with only a 5% deposit will be reduced to 6.64%.

RBS will also halve some of its arrangement fees from £999 to £499.

Chris Eagle, commercial manager at CreditChoices.co.uk said:

“The interest rate cut by two of the biggest mortgage lenders is good news for everyone – both existing borrowers and first time buyers.”

Yesterday, Alliance & Leicester announced it was pulling its range of two-year tracker mortgages after being inundated with mortgage applicants.

A&L said it had taken the decision to remove the tracker products from its range from the close of business yesterday in order to manage the volume of business it was receiving.

It also said that this was only a short term move, and that it would announce new tracker products in due course.