The fact that America’s Federal Reserve slashed interest rates by a draconian 0.75% last week has caused many pundits to call for the Bank of England’s Monetary Policy Committee to cut rates by at least 0.5% in response.

Whilst I believe there is as much chance of this happening next month as there is of Pamela Anderson winning an Oscar, they will almost certainly cut them by 0.25%. The question is will the lenders pass this on?

At the moment lenders are playing a cagey game and consequently there aren’t that many good deals to be had. Part of the reason for this is, because those specialist lenders who used to raise their funds on the money markets have found it difficult to continue to do so and the other reason is, because the mainstream lenders like the Halifax, Abbey, Nationwide and the C&G aren’t that hungry for business.

The first two months of the year are normally the time when new aggressive rates are launched in order to gain market share, but because of the inactivity of the specialist lenders the mainstream lenders already have the market share they are used to fighting so competitively to achieve.

This could be part of the reason why trackers which offered such good value a week or so ago are now creeping up and fixed rates are coming down again. Lenders want to be seen to be doing something, but they don’t want to risk doing too much.

Obviously with the rates which banks lend to each other falling lenders would be hard pushed to justify keeping their fixed rate mortgages so high, but in order to compensate for their reduction the Abbey, Woolwich, Nationwide and Alliance & Leicester have all put their tracker rates up. The gap between fixed and tracker rates is rapidly being eroded.

All in all it’s a very strange time in the mortgage business at present with both lenders and borrowers waiting to see which is the best way to move. We all believe that rates will tumble, but no-one knows yet how this will be reflected in actual mortgage products.