How much you may have lost:

Nationwide: �350 (cut to 4.74% from 5.24%) Halifax: �525 (cut to 5% from 5.75%) Abbey National: �770 (cut to 5% from 6.1%) per year, �70,000 mortgage, annual calculation of interest

The move, which is expected to put pressure on other mortgage lenders to follow suit, will cost Nationwide �90m, a spokesman told BBC News Online.

"It is Nationwide's prerogative to run their business in the way they see fit," a spokesman for the mortgage bank Halifax said.

"There is no such thing as a free lunch though. Millions of Nationwide's savers will pay for today's decision sooner or later."

Nationwide's compensation will take the form of moving all its Standard Variable Rate members over to its Base Mortgage Rate.

The higher rate is currently 5.24%, the lower is half a percentage point lower at 4.74%.

Ruling

Nationwide's decision follows a ruling by the Financial Ombudsman relating to a member who last February was left paying a higher rate of interest than more recent members who were offered a lower standard variable rate.

Mr Williamson said the move was strategic

The ombudsman told Nationwide it had acted unfairly. The member is set to receive compensation from the society.

"The introduction of our [lower] Base Mortgage Rate was a major strategic move to bring fairness to our borrowers," chief executive Philip Williamson said in a statement.

"We believed that this strategy was already the fairest in the UK market and we still do. The Ombudsman has decided that, in one individual case, we did not go far enough."

Discounts removed

Nationwide has also removed all offers of discounted mortgages.

These mortgages "were effectively being subsidised by long standing loyal customers paying a higher rate than those being offered to new customers," the society said.

"The BMR could be and was set at a lower rate than the standard variable rate because there was no longer any requirement to subsidise discounted deals for new customers," the society said.

Halifax

The ruling follows a separate ruling against Halifax late last month that said it was wrong to keep some types of mortgage holders on higher rates while offering cut-price loans to others.

The mortgage bank - part of HBOS following a merger with Bank of Scotland - was ordered to compensate a customer who complained about paying Halifax's old standard variable rate.

The ombudsman's ruling overturned an appeal by the HBOS subsidiary.

"Our position is very clear because the ombudsman's decision was clear too," the Halifax spokesman said.

"He decided on an individual and specific basis and so will we."

Also last month, the ombudsman gave a preliminary ruling in favour of an Abbey National customer regarding a similar complaint.

The bank lost a provisional ruling after a complaint that a 6.1% standard variable rate mortgage should be shifted to the firm's new 4.9-5% tracker rate.

 Click here for BBC Watchdog's guide on how to complain to your mortgage lender