Millions of home-owners received a much-needed boost yesterday when the country�s largest lenders announced they were passing on Thursday�s base rate cut in full to mortgage customers.

Millions of home-owners received a much-needed boost yesterday when the country's largest lenders announced they were passing on Thursday's base rate cut in full to mortgage customers.

They agreed after being summoned to a breakfast summit with Chancellor Alistair Darling and told they must pass on the 1.5 percentage point cut "as soon as possible".

Only hours later, a flurry of announcements came from banks and building societies, saying they were to drop standard variable rates in line with the Bank of England reduction. The moves came as new figures showed that the number of Scots being declared insolvent has risen by 70% over the past year.

HBOS, Britain's biggest mortgage lender, announced yesterday that it would cut its rate by 1.5 points. The same decision has been taken by Nationwide, Royal Bank of Scotland, NatWest, Scottish Widows, the nationalised Northern Rock, and Bradford and Bingley.

Lloyds TSB, which also lends under the Cheltenham and Gloucester brand, and Abbey were the first to announce the cuts on Thursday with a swift reaction to the Bank of England's move to cut the base rate to 3%.

The majority of the major banks hesitated in passing on the cut, due in part to the existing high Libor rate which sets the interest rate on the money banks borrow from each other. But a one-point cut in the Libor rate was announced just before noon yesterday, leading to a race from the banks to make public their improvements to lending terms.

The cuts will provide much-needed relief for hard-pressed homeowners, reducing the monthly cost of a typical £150,000 mortgage by £138 to £887. People with a £250,000 loan would see their repayments drop by £230 a month, or £2757 a year.

Prime Minister Gordon Brown welcomed the banks' action. Speaking in Brussels, Mr Brown said: "On Thursday, we saw decisive action on interest rates, and I welcome the fact that a number of British banks have now decided to pass on the interest rate cut to customers, to families and to businesses."

Other politicians had earlier criticised lenders' apparent unwillingness to lower rates with immediate effect.

John McFall, chairman of the Treasury Select Committee, said banks needed to acknowledge their social responsibility. He said: "They are being short-sighted. Given that they have had copious amounts of money from the taxpayer and are fully guaranteed, it must dawn on them that they have a social responsibility as well. The pressure on them will be maintained until they acknowledge that responsibility."

But the decision by lenders owes as much to a fall in the Libor rate as it does to any political pressure. Libor, upon which variable-rate mortgages are based, fell to just under 4.5%, 1.5 points above the base rate. Although still up on its long-term average, it appears the fall encouraged banks to pass on the reduction in base rates to both standard variable rate and new tracker customers.

Thursday's decision by the Bank of England resulted in a scramble by institutions to withdraw tracker products, which automatically track the base rate. Some 33 lenders pulled their entire range of the deals for repricing.

It is likely to be several days before the products are relaunched. Lenders are expected to take the opportunity to increase their margins, even if they pass on some of the reduction.

In addition, hundreds of thousands of people with trackers were warned yesterday they will not benefit from future rate reductions. Lenders can now use small-print clauses in contracts to stop passing on cuts if the base rate falls below a certain level.