The banks caved in to government pressure to reduce mortgage costs yesterday, but immediately sounded warnings that they would refuse to pass on any further interest rate cuts.

A host of lenders cut mortgages after bank executives were told by Alistair Darling that taxpayers expected them to fall into line with the Bank of England’s one and a half percentage point reduction. But two of the biggest lenders, HSBC and Barclays, are defying the Chancellor’s demands, while others say that they will claw back the cost of implementing any cuts.

HBOS, Lloyds TSB and Royal Bank of Scotland, all of which were bailed out by the taxpayer last month, are understood to be among banks giving warning that they will not pass on any further reductions. HSBC will wait until the end of next week to decide on cuts. Barclays will not decide until the middle of next week at the earliest.

Mr Darling summoned bank bosses to a meeting over bacon rolls and coffee in the Treasury after an outcry at some lenders’ refusal to pass on the biggest interest rate cut since 1981.

The Chancellor is understood to have told the banks that they had mishandled their reaction and insisted that they fall into line. He did not rule out reducing the costs of government-backed guarantees designed to ease inter-bank lending, but said that there was no question of further help unless the Bank of England rate cut was passed on in full.

The nationalised banks Northern Rock and Bradford & Bingley joined Halifax, Nationwide Building Society, Royal Bank of Scotland and NatWest in confirming that they would be reducing their standard variable rate by the full amount after the meeting.

They join Lloyds TSB, which also lends under the Cheltenham & Gloucester brand, and Abbey: both announced cuts of one and a half percentage points yesterday.

Gordon Brown welcomed the news but the decision by lenders to reduce rates is likely to owe as much to a fall in the key inter-bank lending rate, the three-month Libor, as it does to any political pressure. Libor, upon which variable rate mortgages are based, fell by about 1 per cent to just under 4.5 per cent today, to leave it standing 1.5 per cent above the base rate.

While this is still well up on its long-term average of being between 0.15 per cent and 0.2 per cent higher, it is encouraging that two thirds of yesterday’s reduction has been reflected in one go. It took nearly a month for October’s 0.5 per cent interest rate cut fully to take effect. Unless Libor falls further, HBOS, Lloyds TSB and others will refuse to pass on further rate cuts, industry sources have told The Times. Lenders may switch to new standard variable rate mortgages from tracking the base rate to tracking Libor, they added.

Sources close to RBS said that if the Bank cuts rates again RBS may have to prioritise savers over borrowers by keeping interest rates high. David Cameron, the Conservative Leader, called on Mr Darling to reduce the costs to banks of using the Bank of England’s special liquidity scheme. “At the root of the problem is the price at which banks can borrow in order to lend to us. The whole point of the bank rescue package was to reduce this price, but the price of the guarantees set by the Government is now too high,” he said.

Thursday’s decision to slash the base rate to 3 per cent – its lowest level for more than 50 years – appeared to take the banking sector by surprise. It resulted in a scramble by institutions to withdraw tracker products, which automatically track the base rate, with 33 lenders pulling their entire range of the deals for new customers to reprice them.

The reduction was supposed to enable lenders to pass on the rate cut to both standard variable rate and new tracker rate customers.

Just under 10 per cent of Britain’s 11.7 million mortgage customers are on a standard variable rate deal. Where implemented in full the cut should reduce the monthly cost of a typical £150,000 mortgage by between £138 and £887. People with a £250,000 loan could see their repayments drop by £230 a month, or £2,757 a year.