A mortgage price war broke out on the high street on Tuesday after the Halifax decided to follow Nationwide's example and cut its mortgage rates.

The move follows hard on the heels of a quarter point cut in rates which followed the Bank of England's decision to cut rates earlier this month.

Halifax announced a 0.75 per cent cut on Tuesday, bringing its base rate down to 6.75 per cent. The move will see a homeowner with a £60,000 interest only mortgage saving just under £40 a month.

The battle will help boost the feelgood factor which, along with targeted tax cuts likely in Gordon Brown's March 7 budget, could strengthen Labour's position in the run up to polling day.