Homeowners' hopes of relief from the financial crisis were dashed last night as Britain's biggest bank cautioned that it was unlikely to give them the full benefit of this week's expected cut in interest rates, and another bank prepared to put up its charges tomorrow.

Downing Street expressed its frustration with HSBC after a bank executive travelling with Gordon Brown on his trip to the Gulf said that it would not pass on all of any reduction.

Abbey provoked anger by saying that it was raising the rates on its tracker deals a day before the Bank of England was expected to cut rates by at least 0.5 per cent and possibly more.

Abbey, the second-biggest lender, will increase all tracker rates by 0.5 per cent tomorrow and will refuse to offer tracker deals to borrowers who do not have at least a 25 per cent deposit or 25 per cent equity in their existing property.

The Prime Minister, who finishes a four-country tour of the Gulf today, repeated his wish for banks to pass on the benefits of any cut to customers.

But David Hodgkinson, chief operating officer of HSBC — one of the few banks not to need help from the Treasury in recent months — said: “We will do our best but I will not give a categorical commitment that they [HSBC interest rates] will come down.”

HSBC's ability to reduce the cost of borrowing for customers also depended on the lending rate between banks, he told ITV news. “We would listen [to the Prime Minister] but we are in a very turbulent market where it is very difficult to predict what the market will do.”

Downing Street responded swiftly. Mr Brown's spokesman said: “The Prime Minister is very clear — we are taking the action we are taking in order to see that more mortgage holders and small businesses do feel the benefit of that action. When official rates are cut consumers would expect to see the benefits of that.”

Mr Brown told oil chiefs in a speech in Abu Dhabi that it was the duty of governments to ensure the resumption of lending to families and businesses.

Mr Hodgkinson is one of 27 businessmen flying with Mr Brown to Saudi Arabia, Qatar, Abu Dhabi and Dubai. The delegation, which includes representatives of BAe Systems, BP, Centrica and Rolls-Royce, has enjoyed frequent access to Mr Brown on the British Airways charter plane. There have also been dinners and meetings with senior government figures in the Gulf, chaired by Lord Mandelson, the Business Secretary.

Mr Hodgkinson said that credit had been “mispriced” in recent years and an “adjustment” was taking place better to reflect risk. Credit markets were beginning to loosen but, he told the financial news service Bloomberg, it would be “a while” before credit conditions returned to more normal levels.

The remarks brought swift condemnation from opposition politicians.

George Osborne, the Shadow Chancellor, said: “It's all very well Gordon Brown exhorting the banks to pass on the rate cut, but he hasn't even managed to persuade members of the entourage accompanying him on his Middle East trip.”

Vince Cable, the Liberal Democrat Treasury spokesman, said: “Banks are only too happy to increase the cost of lending when interest rates go up. For customers to get a fair deal, this needs to be a two-way street.”

Later HSBC released a statement calling Mr Hodgkinson's remarks “common sense”. It said: “If base rates come down then rates for borrowers will fall, but interest rates must reflect the cost to a bank of its own borrowing and the risk presented by a borrower. That is the foundation of responsible lending.”

Half of all banks and building societies failed to pass on any of last month's emergency half-point rate cut.

Case study
By Helen Nugent

By August Akhtar Yusuf had been forced to leave job vacancies unfilled. Now the owner of a general store in Chipping Norton, Oxfordshire, has cut his employees' hours.

“The number of people coming on to the high street during the past couple of months has been abysmal,” he said. “There are days where the main car park is empty. So we have had to reduce hours [from] 40 a week to 35 for staff.”

The Yusufs employ ten people at Harpers, which sells home and garden products, and while there have been no redundancies, they are anxious about the future. The savings reaped by cutting hours are offset by a rise in utility bills and bank charges.

Mr Yusuf believes that the Government has yet to prove it is determined to help small firms. “The Government has said it will support small businesses, but I have yet to see any of that support come through.”

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