Pressure on banks to cut rates

The government has called on banks to pass on the full 1.5% interest rate cut to business borrowers and homeowners.

The impact of the Bank of England's decision to cut rates by such an unexpected amount will be limited if banks fail to pass on the cut to customers, but so far only Lloyds TSB and Abbey have said they will do this.

Most banks have withdrawn their tracker mortgages while they consider at what rates to reintroduce them.

"It's essential that the banks do pass on the benefit of lower interest rates to people and to businesses," said chancellor Alistair Darling. "Banks need to understand that they need to help their customers."

But the rates at which banks lend to customers is determined by the Libor rate rather than the Bank of England's base rate, making widespread rate reductions unlikely.