A week after ministers promised a new deal for mortgage borrowers, Insurance Times has identified four mortgage lenders which are still selling home insurance tied to mortgages.

The practice, affecting up to 100,000 borrowers, is unlikely to be challenged because the Government is a minimum of a year away from banning it.

The Lambeth, Market Harborough, West Bromwich and Norwich and Peterborough building societies have all been found to offer lower rate mortgages conditional on borrowers taking out lenders' own home insurance.

And borrowers who later switch to a different insurer can face a one-off administration charge of between £30 to £40.

However, on Friday, the West Bromwich, said it was reviewing its policy of offering mortgages linked to home insurance.

Michelle Vosper, spokeswoman for the Council of Mortgage Lenders, said it had not issued any guidance on the matter to either the four lenders which have 100,000 borrowers or its other members.

She said: "It is a decision for individual lenders, although most have moved away from the practice."

Parties which have been campaigning against the selling of insurance bundled with other financial products have urged Government action.

Mike Williams, chief executive of Biba, said: "These building societies appear to have dug in their heels on tied insurance products.

"Persuasion and public opinion seems not to have worked in their case and the Government no longer has any option but to insist they change."

He added that a ban on tied products would benefit brokers by opening up new areas of potential business.

Gary Smith, a director of Financial Futures, a Norwich-based broker involved in the mortgage business, confirmed this.

Smith, who was a mortgage sales manager with lender Norwich and Peterborough for 17 years, said: "It's a dinosaur practice unsuited to the advent of the internet and direct selling. I think people should have a very open and straightforward arrangement with their mortgage, which is what we offer."

But Smith said insurers and lenders benefit from tied insurance deals because they facilitate bulk buying, which in turn increases profit margins.

Direct Line has been a major beneficiary of the increasing competition in the home insurance market and now has 900,000 home policyholders.

However, the insurer claims up to 70% of Britain's 11 million mortgage borrowers still have some home insurance tied to their lender.

It claims lenders' own insurance can cost up to 30% more than the market average of £285 (for both contents and buildings cover).

Alison Lipscombe, spokeswoman for the Norwich and Peterborough, stressed that new borrowers are free to choose between one of its 15 mortgage products which have tied insurance and 15 others which do not.

For example, its two-year fixed rate deal is set at either 5.45% with conditional insurance and 6.79% without. The difference, Lipscombe explained, represents the commission paid to its insurer - Norwich Union.

She added: "We don't have a problem with scrapping tied insurance deals if that's what the Government wants."

Norwich Union declined to discuss its arrangement with the building society, but said it is looking at alternatives to bulk rated products.

A spokeswoman for the Market Harborough building society said: "Our buildings-only insurance is not compulsory, except on our 5.99% deal fixed for two years. Should the insurance not be taken up, the rate will be charged at 6.1%."

She added: "Should the customer choose to take out their own buildings insurance then we charge a one-off fee of £40 for administration of the private policy."

Many other high street lenders have already bowed to customer demand and phased out tie-ins.

They include Britain's biggest lender Halifax, Abbey National, Alliance and Leicester, Woolwich, Barclays and Cheltenham and Gloucester - the mortgage arm of Lloyds TSB.

But Perry Jones, spokesman for Barclays, said the bank withdrew the last of its tied insurance products only two weeks ago.

Trade and Industry Secretary Stephen Byers has said he is determined to ban mortgages linked to insurance "at the earliest possible opportunity" and is preparing to issue a consultation paper in April.

However, a spokeswoman at the Department of Trade and Industry said primary legislation was needed to effect the move and Parliamentary time was unlikely to be available until 2001 at the earliest.