The government recently met lenders to press them to pass on the cut in interest rates made yesterday. The Bank of England reduced its rates by one and a half percentage points, from 4.5% to 3%. The Libor rate at which banks lend to each other has fallen since the cut.

Prime Minister Gordon Brown said the Treasury and the Bank of England had done their bit to help lenders and now banks should do the same for their customers.

Chancellor Alistair Darling held a meeting this morning with bank bosses to push the government's case.

RBS/NatWest group and Nationwide building society were the first lenders to respond, with RBS/NatWest cutting its standard variable rate by the full 1.5%, from 6.69% to 5.19%, while the Nationwide will be also be cutting its base mortgage rate by 1.5%, from 6.19% to 4.69%.

Abbey and Lloyds TSB made similar changes on Thursday, both cutting rates by one and a half points.

The Council of Mortgage Lenders (CML) has said that lenders will make cuts to their rates over the next few weeks, ranging from 0.5 and 1.5 percentage points.
However, the CML warned that it is up to each individual lender as to exactly how much of a reduction will be made.

The director general of the CML, Michael Coogan, said: "The problem banks have got is that they have limited funds and don't have enough money to give to all the customers who may want them.

"I think over the next few days and weeks we will see that the banks and building societies will move by anywhere between 0.5% and 1.5% - the individual decisions will be on the basis of assessing what they want for their savers as much as what they want for their borrowers".

These cuts will be for existing customers on a standard variable rate (SVR) only. Deals for new customers are likely to be re-priced.

The majority of lenders have temporarily pulled tracker mortgages for new borrowers to give them time to consider what rates to reintroduce them at.

David Cameron has said he believes that banks who have seen benefits from the government's bail-out scheme should be made to pass on the full 1.5 points.

One of the reasons lenders are holding back on their rate reductions is that mortgage costs are heavily reliant on the London Interbank Offered Rate (Libor), rather than the Bank of England as this is the rate at which banks lend to each other.

The three-month sterling Libor rate hit its lowest level since the end of 2005 today, from 5.56% to 4.49%. The Libor has a significant influence on new tracker mortgages.

But this rate still remains considerably higher than the Bank of England's base rate - almost one and a half percentage points.

Changes to savings accounts rates are to be announced later.