Building society Nationwide has reduced the cost of its two-year fixed-rate deals, it has been announced.

Divisional director for mortgages, Matthew Carter said: "Nationwide's two year fixed rate mortgage with a £599 fee is available from 5.59% and is one of the most competitive on the high street."

The deal was taken into affect during the weekend. Carter said Nationwide “are pleased to be able to cut the price of some of our fixed rate deals,” although the “wholesale markets continue to be unpredictable” Nationwide would “continue to monitor and respond to market conditions and competitor activity.”

Meanwhile, arrears mortgages now represent 1.55 per cent of mortgage arrears and defaults on unsecured lending, HBOS has confirmed.

Self-certified mortgages rose to 3.59 per cent. It represents 12.6 per cent of the lender’s total home loans.

The average loan-to-value ratio of HBOS’s mortgage book had increased to 52 per cent at the end of September from 48 per cent in June 2008, as an impact of the plummeting of house prices.

In a statement, HBOS said: "While the credit environment will remain challenging, HBOS's robust capital position, to be further enhanced by the injection of capital and liquidity facilitated by the UK government, reinforces the group to meet such challenges."

HBOS also added that corporate lending had also suffered.