Northern Rock, the bank owned by the Government, will only pass on half of the this month's interest rate cut by the Bank of England to borrowers.

The move will come as a blow to borrowers with the nationalised bank, as several other high street banks have passed on the cut in full.

Northern Rock will cut its standard variable rate (SVR) by 0.25 percentage points to 5.09 per cent. It said that in deciding how much of the 0.5 per cent reduction in the Bank of England base rate to pass on, it had “given careful consideration to all of its customers”.

Bradford & Bingley, which is also owned by taxpayers, has not said if it will be cutting its SVR.

HSBC, Lloyds TSB, which also lends under the Cheltenham & Gloucester brand and Nationwide Building Society are all reducing their SVR by the full 0.5 per cent while Halifax and Royal Bank of Scotland/NatWest are cutting their rates by 0.25 percentage points.

HSBC launched a fresh assault on the mortgage market, cutting the rate on one of its deals to just 2.99 per cent - the cheapest rate on the market which experts said could prompt other lenders to follow suit. However, the deal is only available to the wealthiest customers who 40 per cent deposit and are borrowing at least £250,000.

The bank has pledged to double its 2007 level of mortgage lending this year, making £15 billion available.

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