Bank's great rate gamble: UK Property Shop News

The Bank of England move, the biggest cut it has ever made, took borrowing costs down to just 3%.

But there was no guarantee that the High Street banks would pass on the reduction, which would be worth around £130 a month to a homeowner with a typical £150,000 variable rate or tracker mortgage.

But last night LloydsTSB, was the only bank to have confirmed that it would pass on the cut to people with variable rate mortgages.

Chancellor Alistair Darling welcomed the Bank of England's decision. Though he has no power to force banks to hand on the cut, he said: "I believe that it is imperative that banks realise they have got to play their part in helping businesses and helping people, and one of the key ways they can do that is by passing those interest rate cuts through."

HSBC, Nationwide, Barclays and Royal Bank of Scotland said they were reviewing the situation regarding their standard variable rates. There was no immediate comment from HBOS, the country's biggest mortgage lender, but together with RBS, it will be under huge pressure to pass on the full effect of the rate cut.

With 40% of mortgage holders on tracker rates and 10% on standard variable, over four million households will benefit from the rate cut. However, the 50% of households on fixed rates will not see any gain.

Vince Cable, the Liberal Democrat treasury spokesman said the government needed to get tougher with the banks who he accused of treating the government with contempt. He added that banks "are not observing the spirit or the letter of the undertakings to the government and the government is going to have get tougher with them".

The extent of the economic downturn was underlined yesterday by figures from the Halifax showing house prices tumbling 15% from a year ago - the biggest fall for 25 years - car sales in October dropping 23% and construction projects slumping by a fifth.

TUC chief economist Adam Lent said: "This is the right call. It shows the Bank now understands that the problem is recession not inflation. "But the real challenge is to ensure that these cuts are passed on to both business and mortgage customers. Too many banks seem to be more interested in hanging on to their bonuses than using the huge bail out from the taxpayer for its proper purpose of getting the economy moving again.

The Bank was not alone in cutting rates yesterday - the European Central Bank reduced borrowing costs by half a point to 3.25% along with cuts by the Swiss and Czech authorities.

Darling said that the government had ensured that those banks it has part-nationalised would pass the cut in interest rates on.

"In relation to RBS and to HBOS and to Lloyds, if they merge, we're taking shares in those banks and we have agreements with them to make substantial amounts available," he said.

Treasury chief secretary Yvette Cooper hinted the government did have the means to press the banks saying: "We are setting up a new arrangement to monitor the banks, and the way they lend. I don't think it's appropriate for government to take decisions about individual products, but we are making clear that all banks should do their bit. There is an important issue for banks to recognise their obligations to the rest of the economy."

Shadow Chancellor, George Osborne said:"This is a shot in the arm for the economy, but it shows how sick the patient is."

Roger Bootle, head of Capital Economics, said the rate cut was the beginning rather than the end of a substantial monetary easing. "The UK is set to endure a recession that will be deeper and longer than the one seen in the early 1990s. With deflation also threatening, the MPC needs to keep cutting interest rates aggressively.