Mortgage lenders need to pass on Bank of England interest rate cuts to consumers to reduce pressure on the slowing housing market, Chancellor Alistair Darling told Reuters on Saturday.

Darling, in Washington for the International Monetary Fund/World Bank meetings, said the Bank's quarter-point cut in interest rates on Thursday, the third such move since December, would help the housing market but it was important for the benefits of it to be passed on.

"The announcement by the Bank of England this week that it is cutting interest rates will reduce pressure, and I hope banks and building societies will pass that on," Darling said.

"What I am saying to the banks is we have helped them...therefore it is time to ensure that the banks themselves help both individual businesses and mortgage holders by ensuring they pass on these interest rate reductions."

A number of lenders have raised the cost of some of their mortgage products even after the Bank's latest rate cut, and first-time buyers in particular are finding it very hard to raise home loans as banks tighten lending criteria in response to a global credit crunch.

This has raised fears the UK will go the way of the United States, where plunging property prices have put the country on the brink of recession, particularly after a key survey this week showed British house prices falling at their sharpest monthly rate since the slump of 1992.

The IMF said this week that British house prices are nearly 30 percent overvalued after years of double-digit growth and many analysts are now predicting sharp price falls this year.

That could prove disastrous for the Labour government, which is trailing badly in the polls in a country where property prices are a national obsession as two-thirds of homes are privately owned.

But Darling put on a brave face, arguing the fundamentals of both the housing market and wider economy remain solid.

"The housing market is slowing down but this has to be seen in the context of house prices having gone up 170 percent in the last 10 years," he said.

"The fundamentals are strong, unemployment is low, we have historically low interest rates and the economy is fundamentally more strong."

BLAME THE CREDIT CRUNCH

Both Darling and Prime Minister Gordon Brown blamed the housing market's problems on the global financial crisis that has now raged on for eight months because of the fallout from banks having investing in dodgy U.S. mortgage debt.

"Banks are unwilling to lend to each other and have less money to lend to each," Brown wrote in an article for a newspaper to be published on Sunday.

Darling, who on Friday attended a meeting of Group of Seven finance ministers and central bankers where policymakers banged heads on a way to end the crisis, said this is why banks had to make a full account of their losses very quickly.

"One of the best things to do is banks right across the world report the extent of their losses arising from investing in the U.S. housing market last year," Darling said. "If we do that banks will then have the confidence to start lending to each other again and that will help reopen the mortgage markets and will make a big difference to businesses and homeowners."

Darling said he would be meeting with the nation's main mortgage lenders.

The G7 told financial institutions on Friday they should now get their books in order in the next 100 days.

The government also wants international action to help bring down food price inflation, which Darling said is dealing a blow to developing countries.

The cost of rice, the staple diet for billions of people, has doubled this year. Wheat and dairy prices have also shot up even as rising energy prices are putting a strain on household budgets in every part of the world.

"Rising food prices are having a profound effect on developing countries...and also it is impacting in a different way, developed countries as higher food prices are feeding into higher prices which will have an inflationary effect," Darling said. "The IMF and World Bank should look at this problem."

The pound has been sliding sharply alongside the dollar against the euro in recent weeks but Darling had little to add on the G7's warning on Friday that it was concerned by excessive volatility in foreign exchange markets.

"The statement says what it says, it simply reflects the situation as it is since we last met in February. We quite deliberately chose our words and they mean what they say."