Abbey is raising interest rates on its popular "tracker" mortgage deals by 0.5 percentage points, erasing the benefit of yesterday's emergency cut in the cost of borrowing by the Bank of England.

Britain's second biggest mortgage lender blamed the seizure in the money markets for the decision.

Three-month Libor, which dictates the cost to banks of borrowing on the wholesale markets, has not yet fallen in response to the Bank of England base rate cut. Yesterday the Government announced a £50 billion bailout plan for Britain's biggest banks in an attempt to ease the seizure in money markets.

Trackers mortgages, which are pegged to the base rate, have become increasingly popular in recent months as the expectation grew that the Bank of England would cut the cost of borrowing. However, in recent days lenders have been raising rates and pulling deals to ensure their profit margins are not be eroded by a cut in the base rate.

Aaron Strutt, of Chase de Vere Mortgage Management, a broker, said: "Abbey has sent the message that mortgage rates depend on the money markets, not the base rate. Until interbank lending rates fall, banks will continue passing on the costs to borrowers in the form of higher rates."

Last night Cheltenham & Gloucester pulled its most competitive tracker deals for borrowers with a small deposit. Yorkshire Building Society pulled all its trackers at the beginning of the week and does not plan on relaunching them, while Woolwich, the mortgage arm of Barclays, raised rates on tracker deals on Monday.

More than four million homeowners with tracker mortgages immediately benefitted from the Bank of England cut yesterday. A borrower with a £150,000 mortgage will see interest-only repayments fall by £63 a month.

Halifax and Bank of Scotland, owned by HBOS, Royal Bank of Scotland, NatWest, Lloyds TSB and Woolwich have also announced that they will pass on the full rate cut to homeowners who are on their standard variable rates. The new rates will come into force on November 1.

An Abbey spokesman said: "Following the announcement that the Bank of England has lowered the base rate by 0.50 percentage points, as of this Friday Abbey is maintaining rates on its range of trackers for new customers. This is a reflection that the short term variable funding costs have not reduced