First Active and TSB Bank have joined in the latest round of interest rate cuts reducing their variable mortgage rate by 0.75 of a percentage point. First Active's variable rate drops to 6.75 per cent while TSB's rate falls to 6.65 per cent.

Both institutions have also introduced a range of new fixed rate mortgages. First Active has announced a four year fixed rate of 4.99 per cent in the first year, rising to 5.6 per cent for the three remaining years. This is available only to first-time buyers.

TSB is offering a one-year fixed rate mortgage at 4.75 per cent, two year fixed at 5.3 per cent and three year fixed at 5.4 per cent. The bank has also cut its interest rates on overdraft, bridging and personal lending by 0.5 of a percentage point and 0.75 of a percentage point.

But savers will see a substantial drop in rates, which TSB is reducing by between 0.25 of a percentage point and 1 per cent, depending on the type of deposit account held.