Nationwide tonight followed the lead of its rival Halifax and said it would pass on today's interest rate cut to its tracker mortgage customers in full.

The building society's tracker deal contains a so-called collar, stating that once interest rates fall below 2.75% it no longer has to pass on the reduction to borrowers.

But the group said following the 1% fall in the Bank of England base rate it would be waiving the clause and passing on both today's and future interest rate cuts in full.

It estimates the move will save its more than 250,000 customers on the deal around £300 million during the lifetime of their loans based on the current market outlook for interest rates.

It comes after a similar decision by Britain's biggest mortgage lender Halifax earlier in the day not to invoke an option on its tracker mortgage under which it no longer has to pass on all or any reduction once the base rate falls below 3%.

The Halifax move followed speculation that City watchdog the Financial Services Authority could force the group to pass on the cut as borrowers had not been made aware of the clause when they took out their mortgage.

The FSA warned earlier in the week that such clauses would be unenforceable if they were not included in the Key Facts Illustration which is given to borrowers when they arrange a loan.

But this was not the case for Nationwide, which included the clause in the document.

Tony Prestedge, group development director at Nationwide, said: "We were under no pressure from the Treasury or the FSA, this decision has been made voluntarily by Nationwide because it is the right and appropriate thing to do in the interests of our borrowers at this time."

The decision is likely to put pressure on the Skipton and Yorkshire Building Societies, the other large lenders that have collars of 3%, to also waive them.

Nationwide also announced that it was cutting its standard variable rate, which it calls the base mortgage rate, by 0.69% to 4%, and it pledged that all future interest rate cuts would be passed on to SVR customers in full.

It joins only a handful of other lenders who have so far announced plans to cut their SVR.

Lloyds TSB, which also lends under the Cheltenham & Gloucester brand, HSBC and its subsidiary first direct, and Bristol & West and Bank of Ireland, which are part of the same group, were all quick to announce a 1% cut.

They were joined later in the day by the Woolwich, which is reducing its standard variable rate (SVR) by 1.15%, after failing to pass on any of November's cut to borrowers.

But Halifax is passing on 0.25% of the 1% reduction to customers on its SVR mortgage.

The group justified its decision, saying it had passed on all previous cuts, and had to manage its business in a "sustainable and prudent fashion".

The majority of lenders are expected to follow Halifax's lead and not reduce their SVR by the full amount.

Three quarters of groups with an SVR failed to cut their rates by the full 1.5% following last month's cut, with a handful of lenders not reducing their SVR at all.

Ray Boulger, senior technical manager at John Charcol, said: "While borrowers may have received the news of another significant rate cut with hope, I expect very few lenders to pass on the whole of this month's cut, with most reducing their SVRs by between just 0.25% and 0.5%.

"Some who were coerced by the Government into passing on all of last month's 1.5% cut against their better commercial judgment may choose to be parsimonious this time, unless there is further Government browbeating."

If lenders pass on the rate cut in full, people with a £150,000 mortgage will save around £85 a month, while those with a £250,000 one will be £142 a month better off.

But while the rate cut is likely to be good news for some borrowers, it is bad news for savers, particularly retired people who rely on deposit returns for their income.

Adrian Coles, director-general of the Building Societies' Association, said: "Savers will be disappointed at today's news.

"Building societies which pass on both this base rate reduction and the last could halve the interest which they pay to their investors in a very short period of time."