A series of banks and building societies have announced they are passing on the shock cut in interest rates.

They have been bolstered by the inter-bank lending rate, Libor, also falling following Wednesday's 1.5 per cent cut.

Lloyds TSB passed on the cut immediately as it is constrained by a pledge to keep its rates within 2 per cent of the Bank of England's base rate.

Scottish Widows Bank, which is part of Lloyds TSB but operates independently, has also announced it is passing on the full 1.5 per cent to its variable rate customers.

Britain's biggest lender, the Halifax, and Nationwide, Abbey, Royal Bank of Scotland and NatWest have now done likewise. So have Nationalised banks Northern Rock and Bradford & Bingley.

The rate cut is taking a while to filter through because banks' funding costs have remained stubbornly high.

But now Libor, the rate at which banks lend to each other, has also fallen by more than 1 per cent making the reluctance to pass on savings harder to justify.

The Standard Variable Rate (SVR) is supposed to fluctuate in line with the Bank of England's base rate.

But unlike tracker rates, this does not automatically happen - the onus is on the banks to cut their rates as the Bank of England does. Banks tends to be quicker to respond to Bank of England rate hikes than cuts.

However, tracker loans have also not fared as well as should be expected. Following the rate cut, around 30 lenders pulled their range of the tracker loans, which automatically move up and down in line with the Bank of England base rate, for repricing.

Chancellor Alistair Darling held a breakfast meeting with bank bosses to press the Government's case that the cut in interest rates should be passed onto customers.

He wants a return for the billions of pounds the Government has pumped into propping them up in the aftermath of the credit crunch.

Jonathan Davis, director of financial advisors Armstrong Davis, said: "What you have to remember is the banks nationally and globally have lost hundreds of billions, if not trillions, of pounds.

"Most of the banks will cut their variable rates but I'm not sure if they are going to cut them the whole 1.5 per cent.

"They will want to claw back a little bit of profit and the banks will use all they can to shore up their reserves even if it takes them years and one way is not passing on the full cuts to borrowers."

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