Alistair Darling will press lenders to offer better fixed-rate deals and mortgage holidays to homeowners in trouble in return for a £50 billion injection of public money.

The Chancellor told MPs that taxpayers were “entitled to expect” the benefits of the government-backed loans to be passed on. However, he accepted that the intervention would take time to reach consumers.

The problems faced by Mr Darling were underlined as Abbey, Britain’s third-biggest lender, withdrew all its buy-to-let mortgages. Today it will announce that the cost of fixed-rate deals will rise by up to 0.61 percentage points.

A report from Capital Economics, a leading consultancy, forecast that by the end of next year prices could slump by 20 per cent from their 2007 peak. The average house price rose to £199,600 last August and has since slipped to £191,556, according to Hali-fax. Capital Economics’s forecast could wipe off a further £30,000.

Mervyn King, the Governor of the Bank of England, had earlier confirmed the details of the unprecedented scheme to kick-start the banking system but denied that it amounted to a bailout. Under the deal, institutions will have to hand over assets of “significantly greater” value than the Treasury bills they receive to avoid the taxpayer taking on the risk of potential losses. Nevertheless, Mr Darling faced questions over whether taxpayers – who might end up underwriting as much as £100 billion – could lose out.

George Osborne, the Shadow Chancellor, said that he broadly welcomed the package but asked Mr Darling why the Bank was willing to swap credit card debts, including those from the US, for government-backed bonds. “We are trying to keep people in their houses, not prop up credit card lending,” he said.

Vince Cable, Lib Dem Treasury spokesman, likened the Chancellor to Little Red Riding Hood – trying to be helpful but “slowly in the process of being devoured by the British banking system”. The banks, he said, should make rights issues to cover their losses instead of “rattling their begging bowls” to the Government.

George Mudie, Labour MP for Leeds East, said taxpayers were “bailing out the very same bankers that got us into this position in the first place”. He called for lenders to be forced to pass on rate cuts to customers.

Mr Darling said that he could not force lenders to offer better deals. He said that he would press them to “help people whose fixed-rate mortgages are coming to an end as well as helping people who may get into difficulties repaying their mortgages”. He will meet the Council of Mortgage Lenders and other institutions today.

Mr King had earlier warned banks not to return to the sort of risky lending seen during the housing boom. “It’s not part of this scheme to take us back to the excessive lending of a year or more ago,” he said.

A spokeswoman for Abbey said that its rate rise had been planned before the Bank of England’s announcement and was no reflection on how it expected the intervention to play out.

It will increase the rates on its two-year mortgage for borrowers with only 5 per cent equity from 5.99 per cent to 6.6 per cent. Its fixed-rate deals will increase by an average of 0.34 points. It is also withdrawing its most competitive deals for borrowers who do not have 25 per cent deposits. Hali-fax and Nationwide, the biggest lenders, have similar policies.

First-time buyers are finding it almost impossible to get loans, causing activity in the housing market to dwindle. Abbey said that it would no longer offer mortgages to landlords. Bristol & West is to raise the cost of buy-to-let mortgages by up to 0.4 points today.