NORTHERN Rock today became the latest lender to announce it was cutting its mortgage rates as competition slowly returns to the market.

The nationalised bank said it was slashing up to 0.4 per cent off the cost of its fixed rate mortgages, while it was shaving its tracker rates by up to 0.14 per cent.

It is the second time in two weeks that the group has reduced the cost of its mortgage products.

The changes come the day after Nationwide announced it was cutting rates on 34 of its mortgage deals for homebuyers by up to 0.84 per cent.

The reductions made by Northern Rock leave its two-year fixed rate mortgage for someone with a 30 per cent deposit who pays a £595 fee at 3.69 per cent, while tracker deals for the same borrower start from 2.69 per cent, or 2.19 per cent above base rate.

Lloyd Cochrane, head of mortgage products, said: "These rate reductions provide further evidence of our commitment to the mortgage market.

"These products offer some of the lowest rates available for homebuyers and re-mortgage customers alike."

Darren Cook, spokesman for moneyfacts.co.uk, said: "This is good news. We are seeing a growing number of reductions. We hope it will encourage other lenders to do the same."

A number of major lenders, including Abbey and Alliance & Leicester, which are both part of Spanish banking giant Santander, have cut their rates since the beginning of the month.