Nationwide Building Society has announced it will peg down its Base Mortgage Rate (BMR) from 1 December 2008 by the full 1.5%, matching this week's unprecedented cut in the Bank of England base rate. This means the lender's BMR will sit at a rock-bottom 4.69%, as opposed to its current 6.19%.  A borrower with a £100,000 interest-only mortgage will make a saving of £125 a month.  Existing tracker mortgages, which have to follow the base rate, will also decrease by 1.50% from 1 December 2008.

Graham Beale, Nationwide’s chief executive, said: "This is the right and fair course of action for Nationwide to take for all our borrowers at what is a very challenging time for everyone in the UK. Our borrowers, who already benefit from one of the lowest standard variable rates on the high street, will see their rates fall dramatically and will be substantially better off."

Lloyds TSB and Cheltenham & Gloucester have also passed on the full cut, but yesterday the Council of Mortgage Lenders (CML) indicated that many other banks won’t be following suit. This is because they don’t have the resources to deal with the predicted increase in demand, said director general Michael Coogan.

Ahead of the rate cut other lenders, such as Alliance and Leicester, Lloyds TSB and even Nationwide itself, actually withdrew tracker deals that follow the Bank of England base rate. When they come back on the market, the margin over base rate is expected to be greater.

This raises the question of how many borrowers will actually benefit from the rate cut at all.

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