Some Co-operative Bank borrowers, who are already enjoying ultra-low mortgage rates, have seen the cost of their home loans drop below zero as a result of dividends paid by the mutual to its members.

The dividends are paid to nearly 2m Co-operative Group members according to the products they have taken out and how much they spend with Co-op’s businesses. They are worth up to hundreds of pounds a year for mortgage holders.

The latest annual payment is equivalent to 0.1 per cent of a member’s loan balance, compared with mortgage rates as low as 0.001 per cent being paid by hundreds of Co-op tracker borrowers. These customers have tracker deals priced at more than 0.5 per cent below the base rate. They have been charged a nominal 8p of interest a month per £100,000 of loan since the base rate fell to 0.5 per cent in the spring. Hundreds more Co-op borrowers on tracker rates of 0.04 per cent also stand to be in profit thanks to the dividend.

Thousands of tracker borrowers with other lenders have been paying rates of less than 0.1 per cent since earlier this year. But even where mortgages were priced at 1 per cent below the base rate, lenders have ruled out paying interest to borrowers. So Co-op customers are believed to be the only mortgage borrowers in effect on negative rates.

Members of Britannia Building Society, which merged with the Co-op earlier this year, are automatically becoming Co-op members and will receive their first dividend payment in late 2010.