The Consumers’ Association says they have failed to pass on the full benefit of interest rate cuts.

The Bank of England Base Rate fell 2.5 per cent between July 1 last year and July 1 this year – from 7.5 per cent to 5 per cent. But average mortgage rates have gone down just 1.79 per cent – from 8.61 per cent to 6.82. That means that the profit margin has risen from 1.11 per cent to 1.82 per cent in less than a year, bringing lenders extra millions.

The Association estimates that a family with a £100,000 mortgage is losing out to the tune of £59 a month – or £708 a year.

Now there are demands for a punitive windfall tax on big banks, coupled with a move to bring the industry under the new Financial Services Authority, rather than leaving it to a voluntary code of practice.

CA mortgage expert Mick McAteer said major High Street institutions were taking advantage of the fact that there has been a lack of proper competition since most big building societies decided to convert to bank status. Societies which previously worked to deliver the best possible rates to borrowers and savers now need to find millions to pay dividends to shareholders.

He said: "Everyone was very happy to get the windfalls when the building societies converted, but the old saying applies "There is no such thing as a free lunch". Even if you did get free shares, you are paying for those over time with higher mortgage rates or lower savings rates."

Latest figures show that new banks maintain a much wider gap than building societies between the interest rates they charge to borrowers and the rates offered to savers.

The mortgage situation is made worse by the fact that the cost of popular fixed-rate loans has risen sharply in the last three months.

The new details are highly embarrassing for the banks, already under investigation in a government-sponsored inquiry headed by the former telephone watchdog Don Cruickshank. He and government ministers are thought to be sympathetic to accusations that banks are guilty of overcharging, poor service and confusing consumers.

The banks will be further embarrassed by the fact they will soon be revealing record UK profits for the first six months of this year.

The Consumers’ Association believes that the complex nature of mortgages – there are over 3,000 on the UK market – makes it impossible for homebuyers to make meaningful comparisons.

MPs and consumer groups fear that lenders are persuading customers to buy unsuitable mortgages.

There have been claims that endowment mortgages are sold to almost a third of borrowers because they deliver huge commissions to the salesman, rather than because they are the best option for the customer.

Some fixed-rate deals carry lock-in clauses which force borrowers to move later to high variable rates which wipe out any early saving. There are also concerns about clauses requiring customers to buy expensive home contents and building insurance policies.

Last night Labour MP Paul Flynn said the industry could not be trusted to police itself, and should be put under the new Financial Services Authority. The Newport West MP accused the Council of Mortgage Lenders, the industry body responsible for self-regulation, of being ‘self-serving and self-interested’.

He said: "It is quite clear that people are being deceived into taking mortgages that are more in the interest of the company than the customer. If action is not taken to remedy the situation quickly the country faces a scandal of epic proportions. This is not a trivial issue. People face financial ruin if they get the wrong deal, it can make the difference between poverty and prosperity in later life."

Eddy Weatherill, chief executive of the Independent Bank Advisory Service, said: "We must have a windfall tax. Hitting banks in the pocket is the only way to get their attention. At the same time we need a proper watchdog system backed by the law, to deliver proper competition between the banks. Currently, the banks are conning the Government and the public into thinking a voluntary code of practice will do the job."

The Government is understood to be sympathetic to calls for a proper regulatory regime, providing there is sufficient evidence of mis-selling. Trading Standards officers in 100 parliamentary constituencies are currently carrying out a massive exercise to check the quality of advice to homebuyers. A pilot study in Suffolk found serious problems.

A spokesman for the Council of Mortgage Lenders said that while banks were being blamed for not passing on all interest rate cuts, they were rarely given credit for their policy of not passing on high rises, as happened when base rates went over 15 per cent. She said fixed-rate mortgages had risen because they are tied to the cost of funds on the international money markets rather than to base rates.

The CML has insisted that its voluntary code of practice – which covers 97 per cent of lenders and carries a maximum compensation payment of £100,000 – needs to be given time to show it can work.