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The phone bills for BT customers who have only a landline will fall by £7 a month from Sunday.

The price cut came about following a regulatory investigation by telecoms watchdog Ofcom.

It found that although landline rental prices had increased significantly, the cost of providing the services had dropped by more than 25%.

Ofcom said the hardest hit by the rises were customers, many of them elderly, who had never switched from BT.

Those affected will save £84 a year, as line rental falls from £18.99 to £11.99 per month.

The agreement brokered with Ofcom means BT must cap line rental and call charges so they do not outstrip inflation for the next three years.

"We had serious concerns about soaring bills for loyal landline customers," said Jonathan Oxley, director of Ofcom's competition group, in a statement. "This was hurting people who rely on their landline, many of whom are elderly."

Ofcom's analysis found about 1.5 million homes in the UK had only a landline. About one million of these were BT customers, said the regulator, a position that had allowed the telecoms company to increase prices with little risk of losing any business.

More than 75% of these customers had stuck with the same provider since they had first had a phone, Ofcom found, and 66% of them were aged over 65.

BT has written to 900,000 customers informing them of the price cut. Ofcom said 700,000 of those getting letters would not have to do anything to benefit. The remaining customers must contact BT and switch to a different payment package to receive the price cut.

The Post Office, which has the second-largest share of landline-only customers, said it would reduce its prices to £11.50 a month from May.

Richard Neudegg, head of regulation at uSwitch.com, welcomed the change as many people who had only a landline saw it as a "lifeline".

"In recent years, this group of customers, who don't have broadband, have lost out as the shift in competition in fixed telecoms has overlooked voice-only services in favour of broadband," he said.