The Bank of England's decision to cut interest rates has served to strengthen the price war in the UK mortgage market.

British homebuyers will be able to enjoy the lowest rates seen in the UK for 36 years.

The Halifax will cut its variable mortgage rate to 6.5% from 6.75% from 1 May, in line with the Bank of England's cut.

This will bring the rate to its lowest level since February 1965.

And the Nationwide also says that its base mortgage rate is now at its lowest since January 1965.

Following suit

Other banks are likely to follow the example of the Nationwide and the Halifax, rather than face the danger of business draining away to other lenders.

Cheltenham & Gloucester, Virgin One and HSBC are amongst other lenders which have already cut rates by 0.25%.

The price war amongst mortgages is expected to provide a fresh boost to the UK housing market.

The decreases will not effect borrowers with fixed rate mortgages.

The Halifax says that more than two million of its two and a half million borrowers have variable rate mortgages and will benefit from this latest decrease.

Increasing competition

The Bank's Monetary Policy Committee's decided to cut its main lending rate by 0.25% to 5.5% at midday on Thursday.

Interest rates had previously been at 5% in 1999.

The differential between rates charged by mortgage lenders and the Bank of England varies according to the strength of the housing market and the amount of competition in the market.

Strong house sales and increased competition between rival lenders has caused this differential to narrow.

The fact that interest rates for mortgages are now at the lowest level for 36 years is due to the combined lowering of both the Bank of England's rates and the differential.