Nationwide, Britain’s biggest building society, has raised rates on tracker deals for the second time in a week, wiping out the benefit of the Bank of England’s cut in interest rates.

The UK’s third biggest lender pushed up rates on all its deals pegged to the base rate by up to 0.7 percentage points last night, adding up to £90 to the cost of monthly repayments on a £150,000 mortgage.

Last week it raised rates on a number of tracker deals by up to 0.3 percentage points.

The mutual society has levied the biggest increases on borrowers with less than a 25 per cent deposit.

A two-year deal tracker deal worth up to 85 per cent of a property’s value with a £1,999 fee has risen from 6.23 per cent to 6.93 per cent.

Mortgage deals for borrowers with a 40 per cent deposit have gone up between 0.15 and 0.35 percentage points.

Scottish Widows, the mortgage arm of Lloyds TSB, also announced that it was raising rates by up to 0.5 percentage points yesterday on its most competitive deals.

Alliance & Leicester is also expected to raise the interest rates on its tracker deals in next couple of days.

Melanie Bien, director of Savills Private Finance, the broker, said: “Lenders who have been offering more competitve tracker rates are raising rates to better manage the number of applications they are receiving. With base rate likely to fall much further, borrowers are snapping up trackers and lenders are worried about service levels.”

Katie Tucker, of MortgageForce, another broker, said: “Other lenders have been far more cautious than Nationwide and so it is not a surprise that it is now having to revise rates.

“There is certainly quite a gulf now on deals for borrowers with a larger deposits and borrowers who have less than 25 per cent”.

A fortnight ago the Bank of England cut interest rates by 0.5 percentage points, reducing the base rate from 5 per cent to 4.5 per cent, raising hopes of cheaper mortgage deals.

However, mortgage lenders have responded by raising interest rates on tracker deals for new customers to protect their profit margins as the cost of borrowing on wholesale markets to fund new lending continues to be prohibitively high.

Abbey was the first to adjust its tracker deals, announcing that it was increasing rates by half a point, effectively erasing the benefit of the Bank of England's base rate reduction. Woolwich, the lending arm of Barclays increased rates by up to 0.2 percentage points and Cheltenham & Gloucester, owned by Lloyds TSB, raised interest rates by up to half a point last week.

A spokesperson for Nationwide said: "There have been a number of changes by our competitors and that has an impact on our decisions. We have to make sure our rates sit correctly in the market."

About 4.2 million existing tracker mortgage holders will see the full half-point reduction passed in their mortgage repayments next month.