Nov. 7 (Bloomberg) -- HBOS Plc, the U.K.'s biggest home loan provider, and three other banks together representing almost half of British mortgage lending today cut interest rates after government ministers urged a reduction.

HBOS, Edinburgh-based Royal Bank of Scotland Group Plc, Nationwide Building Society and Northern Rock Plc all reduced their so-called standard variable rates by 1.5 percent. Last month, HBOS and RBS agreed to sell stakes to the government, while Northern Rock was nationalized in February.

The cuts followed politicians' demands that banks should match yesterday's cut of 1.5 percent in the Bank of England base rate. Chancellor of the Exchequer Alistair Darling today met eight lenders, pressuring them to cut interest rates to help homeowners and companies.

``We're very determined that the mortgage holder, the small businesses, get the benefit of interest rate cuts from the Bank of England,'' Prime Minister Gordon Brown said at a press conference in Brussels today. He said he was ``pleased'' that rates will now fall.

Passing the rate cut to consumers marks ``the slowing down of the shrinkage of credit,'' said Peter Hahn, a capital markets specialist at Cass Business School in London and a former Citigroup Inc. managing director. ``It could be quite a long time before we start spending again.''

The reductions will have some effect for the less than 10 percent of British homeowners with standard rate mortgages. Nationwide's decision, effective from Dec. 1, will reduce the monthly cost of a 100,000 pound ($160,000) capital repayment mortgage by about 89 pounds a month, the company said.

Tracker Withdrawals

The four lenders together provided 43 percent of U.K. mortgage loans last year, according to the Council of Mortgage Lenders. All four last night withdrew their ``tracker'' mortgages, which follow the central bank's base rate, and which are used by 40 percent of British borrowers.

Barclays Plc, the U.K.'s second-largest bank, is reviewing its standard variable rate. About 97 percent of the bank's mortgages are tracker or fixed-rate deals, Frits Seegers, head of retail and commercial banking unit, said in comments passed on by a spokesman today.

HSBC Holdings Plc, the U.K.'s biggest bank is ``reviewing'' its standard rate, said spokesman James Thorpe. About 3 percent of its borrowers are on the standard rate, with the remainder on fixed-rate deals or tracker rates, he said.

Lloyds TSB Group Plc and Abbey National also cut standard mortgage rates by 1.5 percent yesterday.

To contact the reporter on this story: Jon Menon in London at jmenon1@bloomberg.net

Last Updated: November 7, 2008 13:44 EST