The Bank of England is expected to lower interest rates today with some urging an unprecedented one per cent cut.

A poll of 13 economists for inthenews.co.uk showed every analyst forecasting a cut, with ten predicting the rate to fall half a percentage point to four per cent.

However, the Confederation of British Industry has called for a full one per cent cut to boost the flagging economy.

Economic indicators point to falling inflation and rising unemployment as the UK moves closer to a recession.

Cheaper credit would help homeowners struggling with their mortgage repayments and may encourage consumers to spend in the run-up to Christmas, boosting the shrinking economy.

However, there are already signs any cut in the interest rate will be ignored by lenders.

Despite pressure from Gordon Brown, who told Parliament yesterday the government wants banks and building societies to pass any rate change on, HSBC has warned it cannot guarantee its own rates will come down.

Abbey, meanwhile, raised its tracker rates just days before the expected cut.

The Council of Mortgage Lenders (CML) said: “The real cost of funds to lenders is determined not by the Bank base rate, but by their own cost of borrowing.”

The cost of borrowing can be gauged by the three-month Libor rate, which has been falling since the government announced its scheme to recapitalise the banks.

However, it is still 1.2 per cent above the Bank rate.

The CML said it would not make “commercial sense” to insist or expect that lenders automatically pass on cuts in Bank rate to borrowers until there is a reduction in funding costs.

“A decision not to follow a base rate reduction does not imply that the lender is ‘profiteering’,” the group added.