Gordon Brown issued a stark warning to banks today, demanding that lenders must pass on yesterday's full 1 per cent interest rate cut to their customers.

The Bank of England yesterday cut the interest rate to 2 per cent — the lowest level since 1951 — following a surprise 1.5 per cent reduction in November.

The Prime Minister said this morning: "I think banks should really pass on the interest rate cut. We are talking to the banks.

“Remember last time there was a cut, we had to speak to them before it was passed on and we will be speaking to them again.”

So far, only Lloyds TSB, HSBC and Woolwich have pledged to reduce their standard variable rates (SVR).

However, Halifax, which is part of HBOS, the bank being bailed out by the taxpayer through a merger with Lloyds TSB, has cut its SVR by just 0.25 per cent. A borrower with a £150,000 loan paying Halifax’s SVR will see payments drop by only £25 a month. Nationwide said yesterday it will trim its rate by 0.69 per cent.

Earlier this week, the Queen's Speech outlined plans that could see banks fined and have their assets frozen if they fail to treat their customers fairly if the current voluntary code of conduct for lenders become statutory.

So far this year the Government, using taxpayers' money, has bailed out HBOS, Lloyds TSB and Royal Bank of Scotland to the tune of £37 billion after nationalising Northern Rock, the mortgage lender, which is paying back a £25 billion emergency loan.

Last month, Britain's leading banks were summoned to a breakfast meeting with Alistair Darling, the Chancellor, where he insisted that lenders pass on the full extent of the November 1.5 per cent rate cut.

Many lenders came in for criticism for dragging their heels or not passing on the cut in full. Halifax and Nationwide refused to pass on the full base-rate cut to borrowers on their SVRs, despite pleas from the Government.

This came as figures showed house prices fell at a record rate last month, knocking £140 a day off the value of an average home and plunging 200,000 owners into negative equity.

Values tumbled by 16.1 per cent in the year to November, figures from Halifax show. That is the biggest fall since the series began in 1983 and suggests that the average value of a home is down by about £32,000, to £163,605.

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