Abbey said on Thursday it would cut its two-year fixed-rate mortgage deals by 0.11 percentage points both for home buyers and customers remortgaging existing loans. Other fixed-rate products, however, will remain stable or increase slightly.

Abbey will also cut rates on its flexible-rate and tracker mortgages, by 0.1 percentage points, in a move it says is a response to the Bank of England's 50 billion pound ($99 billion) cash injection to ease tension in the market.

"We will continue to offer competitive products whilst still being careful to balance this against the need to maintain service levels for our customers given recent competitor moves," a spokesman for the bank said.

Abbey said in February that it would take advantage of difficult conditions to outperform rivals, benefiting from the strong capital position of its parent group.

Earlier this week, the lender said it had grabbed 15.9 percent of Britain's mortgage market in the first quarter, taking advantage of a retreat by rivals. That compares to 8.5 percent in the previous quarter.

Abbey's traditional share of the mortgage market is just over 9 percent, ranking it third behind HBOS and building society Nationwide.

Thousands of mortgage products have been withdrawn from the UK market in recent months and lenders have raised interest rates as a credit crunch has increased funding costs and the UK housing market and economy have slowed.

Abbey has also trimmed its offering, all but scrapping buy-to-let mortgages in April, for example. The lender is focused on prime loans, with only 3 percent of new mortgages written at a loan to value of more than 90 percent.

Source: Reuters UK