Barclays, Alliance & Leicester and HSBC came under growing pressure last night to fall in line with other mortgage lenders and cut their key rates.

Most big banks reduced rates on their home loans after a meeting with Alistair Darling, who urged them to pass on the benefits of the Bank of England's 1.5 per cent rate cut on Thursday. Most banks had balked at passing on the cuts.

However Halifax, the UK's biggest lender, Royal Bank of Scotland, Northern Rock, the state-owned bank, and Nationwide, the largest building society, reduced their standard variable rates (SVRs) by 1.5 percentage points mirroring the cut in the base rate. Lloyds TSB and Abbey cut rates by that amount on Thursday. Barclays is the only major lender not to have announced a cut in variable rates. HSBC has also declined.

Mortgage experts said that there was pressure on these and other lenders to match the Bank of England's reduction, but that smaller providers could struggle to pass it on in full. Less than half of lenders passed on the half-point cut in the base rate last month.

Neil Johnson, of the Building Societies Association, said: “The magnitude of the cut will have taken lenders by surprise and many will need time to respond. However, the subsequent drop in the cost of borrowing on wholesale markets will certainly help.”

Robert Clifford, of Mortgageforce, a broker, said: “There should be a significant improvement in the choice and pricing of mortgages on the market before Christmas.”

Yesterday morning Mr Darling summoned Nationwide and the leading high street banks to Downing Street for a meeting to discuss how they intended to respond to the 1.5 percentage point rate cut. However, lenders have denied that the pressure from the Government was the reason for the reduction in variable rates.

Instead, banks have pointed to a sharp fall in wholesale mortgage funding. Three-month Libor, the interbank money market rate used to fund new mortgage lending, dropped by almost 1.1 percentage points yesterday from 5.56 per cent to 4.49 per cent, its lowest level since May 2004. Banking experts warned that the cost of borrowing wholesale money remains far higher than base rate, making future cuts in variable rates unlikely.

Even though the lenders' decision to cut SVRs has been welcomed, advisers warn that the number of attractive deals for new borrowers has shrunk over the past two days as popular tracker mortgages have been pulled from the market. There are only 162 tracker deals on the market this weekend, compared with 258 at the beginning of the week, according Moneyfacts.co.uk, the financial website.

Lenders are expected to launch new deals next week, but experts warn that rates are set to increase. Aaron Strutt, of Chase de Vere Mortgage Management, said: “Lenders are going to have to increase the cost of tracker deals to recoup the losses incurred from passing on the cut in standard variable rates. The drop in Libor could be reflected in new rates but we still predict tracker rates to be pegged at around 2points above base or 5 per cent.”

The days of savers earning more than 7 per cent interest are over, after ICICI and Anglo Irish bank cut the rates on their top-paying accounts.

ICICI, the Indian bank, has long topped the best buy tables with its HiSave one-year bond paying 7.1 per cent, but it will replace that with a deal paying 6.6 per cent. Anglo-Irish Bank, which had a fixed rate bond at 7.05 per cent interest for one year, replaced this with a bond paying 5.55 per cent, in line with the Bank of England's 1.5 percentage point cut. It has repriced its savings accounts from 6.55 per cent down to 5.4 per cent for a seven-day notice account and from 6.4 per cent to 5.25 per cent for an easy access account.

This brings to an end a period when returns on savings accounts reached seven-year highs as lenders became increasingly reliant on consumer deposits to fund their mortgage book.

The only savings account still paying 7 per cent is the Close Brothers one-year fixed-rate Premium Gold account which requires a minimum deposit of £10,000. The rate is guaranteed only on applications received before close of business on Monday.

Saga, the financial services provider for the over-50s, cuts its one-year fixed rate bond by 0.5 percentage points to 6.35 per cent. Its six-month bond still pays 6.9 per cent, but it is expected to be withdrawn on Monday.

Bradford & Bingley, part of the Spanish banking group Santander, has withdrawn all its fixed-rate bonds, which paid up to 6 per cent. Abbey, also part of Santander, will slice the top rate on its one and two-year fixed rate bonds by one percentage point on Monday, but anyone who applies before the end of tomorrow will still get 6 per cent.

Northern Rock, the nationalised bank,withdrew all its one, three and five-year fixed-rate cash Isas paying 6per cent yesterday, without announcing what it would replace them with.

National Savings & Investment, also backed by the Government, cut the rate paid on its Direct Isa from 4.8 per cent to 3.3 per cent.

Times Recommends

• C&G axed - 1,660 jobs to be lost
• UK house prices rise 1.1% as buyers return
• Mixed reaction to US banks repaying bailouts