After the events of recent days we have seen mortgage rates increase, without interest rate rises from the Bank of England - purely because of the credit crunch and the increase in the cost of borrowing.  So how will this effect the housing market and what assistance can the Bank of England give home owners?

We are in a fairly surreal situation at the moment, with the Bank of England keen to reduce interest rates, although their scope is limited due to the potential for inflation to move ahead again.  We have interest rates steady, but mortgage rates increasing across the board, with a high probability of more rises to come in the short term.  Confidence in the financial sector is draining quickly, although the homeowner is seeing no real deterioration as yet. So what really is going on?

The housing market is bound to be effected by recent events, not just because some banks and financial institutions are  unable to offer mortgage deals at the moment, but because their cost is rising. This confusion in the mortgage market is going to take some time to filter through the system, and there will be many mortgage applications put on ice or even refused.  When you consider that the housing market is purely based on supply and demand, the demand will start to slacken yet the supply is still increasing - a recipe for disaster?

There is no doubt that while the Bank of England will be doing what they can to see some of the struggling companies through the worst, we will need to endure a little more pain before the situation resolves itself.  Delays and increased borrowing costs will hit the housing market, effect the economy and generally depress the mood of the consumer.  What can we do?

At this moment in time there is very little that we can do, except hope that the situation does not deteriorate any more than it already has done.  Once we see confidence picking up again, then we will no doubt see lenders returning to the market and supply increasing again.  This may be some little time off at the moment, so brace yourself for a rocky ride!