First direct has cut the rates of its existing capped tracker mortgages by 0.20 percentage points.

It has also added ‘fee free’ options to the range.

the bank says that, assuming the Base Rate was to remain at 0.5% until the end of 2011 then rise steadily by 1.0% per year until the end of 2014, customers with a £150,000 mortgage would be £2,991 better off with first direct’s capped tracker than the industry average tracker (75% LTV 3.04% +BR) and £1,433 better off than with the average fixed rate (three-year 75% LTV 4.31%).

First direct’s 75% LTV ‘fee free’ option tracks the Bank of England Base Rate plus 2.78% (currently 3.28%), but should the base rate rise as predicted above, customers can take comfort from the fact that their mortgage rate will never go above 4.68%. Customers would be £1,869 better off than with the average tracker and £310 than the average fix, while not having to pay any up-front fees.

Richard Tolchard, senior mortgage product manager at first direct, said: “Homeowners continue to be unsure whether to track or fix. With a capped tracker they don’t have to choose – they get a low tracker rate whilst rates remain at 0.5% while having the reassurance of a cap to the rate when base rate rises.