Well it’s not entirely all doom and gloom this week, despite the worsening state of the economy and the predictions that we will not be getting a drop in interest rates next month after all.

The increasing cost of oil and food is making it difficult for the Governor of the Bank of England to do what all homeowners want- which is to announce that the base rate will be cut to 4.75 per cent.

The good news is that the Halifax have reduced their 3 and 5 year Product Transfer fixed rates by 0.1 or 0.2% and their 3 year tracker rate by 0.2%. In addition they are increasing the maximum loan size on the tracker up to 75% LTV from £500,000 to £2m.

These Product Transfer rates are only available to existing customers coming to the end of a deal but there will be many of them because two years ago they were offering very competitive rates of - 4.69% for purchases and 4.79% for remortgages. To me this seems to indicate that not only do the Halifax want to keep their customers, but we could be seeing an increasing number of lenders battling to increase their market share.

If this is the case watch out for similar cuts from other lenders.

The Bank of England was criticised by economists and the housing industry yesterday after leaving the base rate on hold. But really what did they expect? Back to back rate cuts were never on the cards.

The Bank's Monetary Policy Committee voted to leave borrowing costs unchanged at 5per cent, despite many experts' fears that this tactic could endanger the wider economy.
Howard Archer of Global Insight said: "The recent stream of weaker data and survey evidence relating to consumer confidence, retail sales, the housing market, the services sector and manufacturing activity suggest that the UK economic downturn is deepening."
I can’t speak for the latter two sectors, but I can certainly vouch for the fact that the housing market is on its knees. Estate agents are disappearing by the hundreds each week. According to the MD of a prominent chain in the Midlands the situation is worse than the early 90s, because then at least then you had lenders who wanted to lend. Today, he said, you’re hard pressed to get a mortgage irrespective of whether you are a first time buyer or someone who wants to remortgage, because the arrangement fees are ridiculously high.

With LIBOR at 5.78 per cent and still well above base, the banks yesterday made a desperate dash for cash offered by the Bank of England. This is a sure sign that things are still far from normal and why we will get a rate cut of 0.25% next month.

Will this make things any easier for homeowners and first time buyers? I would love to think so, but I don’t see much improvement for at lease another six months.

According to the Bank of England’s latest Financial Stability Report the worst of the credit crunch could now be over. The Bank believes that the scale of losses resulting from the crisis may be overstated and that if financial institutions continue to talk pessimistically about their plight it may well turn into a self fulfilling prophecy.

That’s the good news. The bad news for homeowners and the housing industry in general is that this announcement will have no impact whatsoever on lenders, their mortgage rates, or on the number of mortgage products available.

The reason is the same now as it has been for many months. The banks would love to be able to lend, but there is simply not enough money around to do so. The banks which would often raise money in America can’t do so because the people that provided the billions of pounds that they then lent in the form of mortgages have lost their appetite for anything to do with property. The collapse of the US housing market has seen to that.

Money is available in the EU, but it pales into insignificance compared to monies previously available from the States. The £50billion that the Bank of England recently made available to our lenders is a start, but it is only that. Many more billions will have to be made available before new products are launched and rates begin to come down.

Over to you Governor.