Alliance & Leicester has cut the rates on some of its most popular home loans – signalling that competition may be creeping back into the mortgage market.

The high street lender, which last month accepted a £1.3bn offer from Spain’s Banco Santander, said the range has reduced by between 10 and 55 basis points.

Several UK mortgage lenders have trimmed their mortgage rates in the past two months in response to a decline in the cost of interest rate swaps, used by banks to price fixed-rate mortgages. But mortgage costs remain historically high, having risen sharply in the past year as banks stung by the credit crisis tried to conserve capital and protect profits.

Daily Telegraph