Property experts have warned that the much-publicised credit crunch has turned into something far more serious - a full-blown credit crisis. According to Savills Research, interest rate reductions are unlikely to make a significant change to the property market outlook. This is due to the fact that it is not the cost of the mortgage, but rather the availability of the loans that is negatively affecting the market.

Firstrung.co.uk quotes Yolande Barnes, Director of Savills Research, as saying, "The credit squeeze became a crunch and is now a crisis. It is the availability of finance rather than the costs of finance that is the issue. Base rate reductions have little impact in a situation where mortgages are being severely rationed.”

Barnes continues by saying, “Lack of funds, high arrangement fees and high variable rates mean that the effective average mortgage rate is likely to remain little changed for the average borrower and some borrowers will face big hikes when fixed rates come to an end".