Lloyds TSB has increased its interest rates on tracker mortgages by up to 0.4 percent.

The mortgage lender is the fifth largest in Britain and has increased the rates in a move that effectively prevents any new borrowers from taking advantage of the full 1 percent interest cut put in place by the Bank of England last Thursday.

Lloyds TSB has pushed up the interest rates on mortgages that are pegged to the base rate by up to 0.4 percentage points.

More than four million tracker mortgage borrowers with Lloyds TSB already will see their monthly repayments decrease from the 1st January, which will mean a significant fall by £125 per month for a homeowner with an interest only mortgage of £150,000.

The bank has defended its decision by saying their wholesale lending costs have not reduced in line with the base rate cut.  The libor rate, which tends to be the measure of variable rate mortgage lending, has only dropped by 0.4 percent since the BoE cut.

Many other lenders have pulled their tracker mortgage deals completely since the cut.

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