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.

They say a week is a long time in politics. They should try mortgage broking.

A rollercaster ride hardly begins to describe the events of last Monday when lenders were pulling their products left right and centre and we brokers, as usual, were left to explain to our customers just why the product we recommended in the morning was suddenly no longer available in the evening!

Thankfully given the economic problems the entire world is now facing our customers didn’t vent their spleen on us.

We obviously need a deep cut in interest rates to restore confidence and we need it now, but if you think that we are going to get anything like the 75 basis points reduction they had in the States yesterday then think again.

Minutes just released by the Bank of England's rate-setting Monetary Policy Committee (MPC) show that it voted 8-1 to keep interest rates on hold in January and whilst it is widely anticipated that it will reduce rates to 5.25% from 5.5% next month, the minutes also showed that more aggressive cuts are unlikely.

The reason for this is because the MPC believe that inflationary pressures are increasing.

I know that the Bank of England’s remit is to keep inflation on or under the 2% level per annum, but desperate times require desperate measures and a cut of 25 basis points will hardly soothe the nerves of homeowners increasingly worried about meeting their mortgage payments.

If you are unfortunate enough to be in this position what can you do?

First, you should talk to your lender and see if you can switch from a repayment mortgage to an interest only one. They will probably charge you £50 to do this, but it could save you thousands of pounds a year in outgoings. This can only be viewed as a short term measure, because failing to pay off the capital means that you risk not being able to pay the loan off in its entirety at the end of the term.

Something else worth considering is to extend the term of your mortgage. If, for example you have a mortgage over 25 years you could possibly extend this to 35 years. On a mortgage of £150,000 at an interest rate of 6% you could save over £100 a month.

Finally, you could consider remortgaging to release some equity in your property. Despite everything you’ve read in the papers, there are some lenders out there who are offering free legals and free valuations and if you talk to your friendly independent broker they will soon tell you if you would qualify for one of these deals.

According to last night’s London evening newspaper, the ‘Evening Standard’ first time buyers in London will have to double the size of their deposits as banks and building societies cut back on lending following the credit crunch. “This means, that based on the price of an average London property- now around £350,000- a first time buyer would have to find a deposit of £35,000 instead of £17,500”.

Now I don’t know where this reporter lives, but there a lots of properties in London which are nowhere near that price. They won’t be in Chelsea , Hampstead, or Knightsbridge admittedly, but there are thousands of properties available in many other parts of London , north and south of the river that are far cheaper than that.

This aside the article goes on to record how some lenders like the Alliance & Leicester, Cheltenham & Gloucester and the Britannia have all reduced their maximum loan to value levels to 90% or less, making it even harder for first time buyers to get on the ladder- especially when they were used to getting 95% and even more with Northern Rock, whose rates now are unfortunately ridiculously high.

There is however, another way that first time buyers can get on the ladder and that is via shared ownership. This is a scheme whereby a first time buyer purchases a property from a housing association. They normally purchase 50% of the property and can increase their equity in the property- known as staircasing- as time goes by.

The problem with the scheme, however, is that it isn’t open to all; there aren’t enough properties to go round and, as you can imagine there are long waiting lists. A far better scheme is called Joint Equity, because you don’t need to find a hefty deposit and it's open to everyone.

The Joint Equity scheme works by matching aspiring owners- usually first time buyers, but not exclusively- with individual property investors. The owner partner and the investor partner purchase the property, which can be of any description and anywhere in the country, together. As with the shared ownership scheme with a housing association with the Joint Equity scheme the owner partner pays the investor a monthly return for the part of the property they do not own themselves.

The benefit for first time buyers , or owner partners, is that they gain the security of their own homes and take responsibility for the property. The benefit for investors is that it’s much better than a buy-to-let as they get a “hands off investment” in the property, good returns and no voids or damages.

Both parties are protected by the Joint Equity Partners Contract which controls the relationship and protects everyone’s interests. When the property is sold, capital gains are shared between owner and investor according to their ownership shares.

So if you are a first time buyer don’t despair. There is hope.

Just take a look at www. jointequity. co.uk

Recent research carried out by the Council of Mortgage Lenders (CML) indicated that there was real consumer interest in long term fixed rate mortgages given the uncertain times we now live in.

Apparently 42% of those interviewed said that they would take a fixed rate deal for peace of mind. Of these 43% said that they would prefer a medium, 5 to 10 year deal, or long term, 10year+.

Oddly enough this goes completely against everything we have experienced since we returned to work after Christmas. We are finding that clients are increasingly interested in variable rates and trackers in particular. Very few are asking or are interested in a fixed rate product.

Fixed-rate mortgages were introduced into the UK in the late-1980s in response to demand for something that would reduce homeowners’ exposure to shifts in interest rates. Unlike much of Europe and the US where mortgages are often fixed for 30 years, long-term fixed mortgages have never really taken off over here where the most common period for a fixed-rate mortgage is 2- 3 years.

So why are we finding trackers mortgages so popular at the moment? It’s simple. The markets are expecting interest rates to fall and we and our customers support this view.

Anyone choosing a fixed-rate mortgage now which is cheaper than the variable rate alternative when they take it out, will soon find themselves penalised as variable rates fall throughout the year and they are left with higher monthly repayments.

Perhaps its time for the CML to do some more research.

So now we know.

The Monetary Policy Committee of the Bank of England has decided to keep interest rates unchanged at 5.5%.

The Bank faced a very difficult decision, having to balance indications of growing inflationary pressures against signs of an economic slowdown, particularly in consumer spending.
The decision will disappoint homeowners and retailers alike who had called for a cut after disappointing Xmas results.

Although rates have been put on hold this month, they are now almost certain to be cut in February. Some economists are calling for a cut of 0.5%, but I think that’s highly unlikely. A cut of 0.25% followed by another one perhaps in April seems to be on the cards.

While a rate cut would have raised both existing borrowers and potential first time buyers’ confidence, it could also have risked adding to price pressures growing on the back of higher oil, gas, electricity and food bills.

It will be interesting to see how close the vote was.

Last month all nine policy makers that constitute the Bank of England’s Monetary Policy Committee agreed to cut interest rates to 5.5% from 5.75%. Unfortunately the unanimity they displayed was not shared by lenders as approximately one in five of them failed to pass it on. To my mind this begs the questions just how much money do the banks want to make and whatever happened to the principle of Treating Customers Fairly?

Intelligent Finance which I have always rated as a decent lender didn’t reduce it’s standard variable rate. Neither did the Skipton or Newcastle Building Societies, nor 16 other lenders for that matter. In addition Northern Rock- or wrek- as brokers are now referring to it- failed to pass on the full cut as did Egg and Alliance and Leicester.

I think I can appreciate, given their current plight, Northern Rock and Alliance & Leicester wanting to boost their profit margins, but in these difficult times borrowers need as much help as they can get and it is plain for all to see that we cannot expect much help from the banks.

They may well argue that they have all just signed up to the new Banking Code which requires them from March to offer at risk customers alternative debt repayment plans , but this is shutting the barn door after the horse has bolted.

If the Bank of England does cut rates again on Thursday what do you think are the chances of lenders passing on the cut in its entirety. Slim if their recent actions are anything to go by.

The Bank of England’s Monetary Policy Committee meet this week to decide whether to cut interest rates this month or to wait until February. Unlike this time last year there is a unanimous belief amongst economists that interest rates are only heading downwards. What they can’t agree on is when the cuts should come and by how much?

Last month’s decision to cut by 0.25% was taken to prevent a sharp fall in economic activity, but nothing that has happened since then has brightened the outlook. Retail figures over Xmas are thought to be disappointing. Share prices are tumbling, sterling is falling and the credit crisis is still with us and is likely to remain so for at least the first half of the year.

So it should be a no-brainer really. We need another 0.25% cut in base rate and we need it now. What’s more we then need all lenders, not just some, to pass on the cut in full to borrowers.

Will we get the cut on Thursday? I have a sneaking suspicion, and I hope I’m wrong, that the Bank will wait. Energy prices are rising and inflation is still a major worry. In addition, three month LIBOR- the rate at which banks lend to one another- has tumbled to 5.83%, just under 0.4% above the base rate.

For the sake at least of 1.4m homeowners whose fixed term rates are up this year, let’s hope Mr King acts sooner rather than later.

15 years after the last shock to the housing market and following almost unbroken growth since then there now appears to be a daily ritual amongst economists of predicting whether the market is heading for a full-scale crash or a soft landing?

The problems started in the US and over there, there is a broad consensus that things will get much worse before they get better. House prices are forecast to continue to fall and, as inflation and unemployment continue to rise so consumer incomes will be squeezed. A recession cannot therefore be ruled out.

In the UK, whilst we are in danger of talking ourselves into a recession which I don’t think will happen, there is no such consensus about the housing market. Optimists such as the Nationwide and Phil Spencer the presenter of Channel 4’s programme Location, Location Location believe there is no need to panic. They feel, that whilst the continuing credit crunch will make things uncomfortable throughout 2008, the ongoing shortage of housing stock, coupled with the cuts in interest rates and the increasing number of tenants will ensure a soft landing.

But pessimists led by the International Monetary Fund paint a much bleaker picture. The IMF believe that the UK housing market has been overpriced by as much as 40% for years and investment banks such as Morgan Stanley predict that prices will decline by 10% this year and thereby revert to those of early 2007.

Which ever camp is right and I tend to side with the optimists, believing that prices will either stabilise or fall by no more than 5% this year the key to sustainable housing market growth lies in the hands of first time buyers who are finding it more difficult than ever to get on the housing ladder. According to the Halifax only 300,000 first time buyers entered the market last year which is the lowest level since 1980.

In theory young buyers are better off than ever. They are better educated, harder working and better paid, but the tightening of lending criteria and the shortage of homes make it almost impossible to get a mortgage. It’s all very well for the Government to proclaim that we need to build 240,000 homes a year to keep up with the current demand, but according to the Home Builders Federation we can only manage to build 180,000 each year. What therefore is the answer?

Apart from incentivising first time buyers by way of more affordable housing and the relaxation of stamp duty one sure fired way is shared ownership and for this reason I think this year we will see more lenders than ever offering these schemes.

I do have, however, a problem with these schemes. As well intentioned as they are, first time buyers are limited by the number of properties available and by ever increasing waiting lists. Far better then to look at Joint Equity Ltd. They offer a shared ownership scheme with no restrictions and no waiting lists. As a first time buyer it may not be the cheapest option available but it may well be one of the best.