Gordon Brown stepped up demands that mortgage lenders pass on the full benefit of the historically low 2% interest rate to their customers yesterday as the government laid the ground to intervene directly in banking systems.

"I think banks should really pass on the interest rate cut. We are talking to the banks. Last time there was a cut, we had to speak to them before it was passed on and we will be speaking to them again," the Prime Minister said.

High street banks will next week be summoned to a meeting at the Treasury to discuss their lending practices. Treasury officials said Alistair Darling "will do whatever it takes" to press the banks into passing on interest rate cuts, indicating that they will not hesitate to intervene. They also emphasised that the chancellor was aware that banks need to attract savers.

Reports that the government has begun considering contingency plans to nationalise the banking system if lending conditions do not improve were denied as being "far fetched" by a Treasury spokesperson.

Earlier, Halifax Bank of Scotland, the country's biggest mortgage lender - which recently received £11.5bn in taxpayers' money in a Government bail-out - said its customers would enjoy only a quarter-point cut to its standard variable rate.

Nationwide, the biggest building society, said it would pass on only two-thirds of the cut. Out of Britain's eight biggest banks, just three promised to pass on the cut in full to their customers.

Alliance & Leicester and Northern Rock both charge borrowers on their standard variable rates 5.84% interest compared with the Bank of England's 2% rate, which was reduced by a full percentage point on Thursday. Abbey and RBS/Natwest have also left their rates above 5%.

Bradford and Bingley cut their standard rate by 0.75% Many banks have withdrawn their most competitive deals. Halifax, along with Lloyds TSB - which has received £5.5bn in taxpayers' money - pulled all of their tracker mortgages for new customers. Abbey and Alliance & Leicester followed suit in withdrawing the increasingly popular products, which track the Bank of England base rate.

Interviewed on morning television, the Prime Minister said that savers were not being punished by the decision to lower interest rates. "What I would be worried about most is if we had inflation going up and taking away the value of people's savings," he said. "The interest rate going down is necessary to get the economy moving again. If you are a saver the best protection you have is that inflation is kept low."

If the record low interest rates do not work, the Bank of England will come under pressure to drop interest rates further towards zero.

Lord Mandelson, the Business Minister, warned yesterday that the government does not have a "magic wand" to protect the UK economy from the global economic crisis.

He said that the measures the government had announced recently, such as cutting VAT and helping homeowners with their mortgages, were designed to protect businesses and families.

Addressing the North East Economic Forum in Newcastle-upon-Tyne, via a videolink, he stressed the government had no intention - unlike previous governments faced with recession - of cutting public expenditure or investment.

"We are doing this because we are absolutely sure that the best way of helping workers and their families is to help the businesses that they work for," Lord Mandelson said.

"We have got to do everything we can to keep businesses afloat during this global economic downturn. I am not promising miracles; I don't have a magic wand.

"All I can say is that the government is determined to do everything it can, to do its best, to use our energy and to deploy what resources we have to make sure that viable businesses survive, that jobs are maintained and that we do what we can for homeowners as well."

Speaking to the same conference, Conservative shadow chancellor George Osborne said the international monetary system has given its own verdict on the fundamental weaknesses of the economy in the value of the pound.

"The government tells us their plan is being copied around the world. It is just not true," said Mr Osborne. "Our Prime Minister is left with a choice: he can watch as the economy falls deeper into recession or he can swallow his pride, admit he got it wrong and change the bank rescue package so it works."

Mr Osborne said the government should set up a national loan guarantee scheme that would guarantee banks' lending to UK firms.

"This guarantees billions of pounds of new loans to British businesses and would do so through a commercial insurance scheme passed on by the banks by properly protected transfers."