C&G pledge to pass on interest rate cut in full

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Cheltenham & Gloucester said: "We will be updating our standard variable rate (SVR) in line with any reduction made by the Bank of England."

The move will come into effect on 1 December.

It is highly unusual for any lender to make such a commitment ahead of changes in the base rate. The move follows criticism of the majority of banks and building societies that did not pass on the last 0.5 per cent cut early last month.

Cheltenham & Gloucester is owned by Lloyds TSB, one of the high street banks receiving taxpayer money as part of the government bail-out, and could have expected particularly harsh censure if it did not help out its customers.

The other lenders owned by banks accepting government help, including Halifax and NatWest, were likely to drop their SVRs later today, but many others may pass on only a part or even none, of the expected base rate cut.

City economists were predicting that the Bank would slash its base rate by at least 0.5 per cent to 4 per cent, but there have been increasing calls for a more dramatic full point reduction as Britain slides into recession.

A full point would be the biggest downward move since 1993. But measured as a percentage reduction in the cost of borrowing it would be the deepest since 1939.

There are now calls for interest rates to come down dramatically by the end of the year.

Jaguar Land Rover chief executive David Smith called for a "courageous and decisive change in interest rate policy".

"We need to see those getting much closer to US rates; much closer to the 2-3 per cent level by the end of the year," he told BBC Radio 4's Today programme.

"What we really need is this decisive action now to avoid that prolonged recession."