“Creditors are not obliged to stick to the agreement and can increase their demands should they wish, which just perpetuates the problem. A DMP can also last for years, putting the chance of making a fresh start that much further out of reach,” says Terry Balfour of IVA.

“We are also being told by our callers that they are loathe to jump one way or the other until the economy settles down. Making the decision to take on an IVA or go bankrupt is a major one and they would rather battle on until they can’t hold out any longer.

“There’s been a lot of talk about the credit crunch over the past year but I would say it’s only now that the effects are really hitting their target and ordinary people are taking the blows,” Balfour added.

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“There are signs of increasing activity in the mortgage market which can only be helped by falling rates,” said Tom Girling, mortgage product manager at the Yorkshire Building Society. “We are keen to pass on money market rate reductions to borrowers who are finding life tough at the moment with all of the other cost of living increases in fuel and food items.”

“In these uncertain times we are committed to helping our existing customers who are about to come to the end of their current deal,” said Jon Cooper, head of mortgages for existing customers.

“We have introduced these new competitive rates to support customers who want to keep monthly repayments as affordable as possible.”

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“Bearing in mind market conditions, we consider this to be a satisfactory performance,” Bellway said in its trading update.

“The lack of mortgage finance has brought the housing market to a virtual standstill with first-time buyers rapidly becoming an endangered species,” Ian Perry, a spokesman for the Royal Institute of Chartered Surveyors, said.

“Bellway has today set the scene for what is likely to prove a highly bleak half year results season for the UK housebuilders over coming weeks,” said Keith Bowman, equity analyst at Hargreaves Lansdown Stockbrokers.

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“On a £150K repayment mortgage, a £100 increase in fee equates to an additional 0.06% increase in the rate. Therefore, in real terms a customer has only benefitted from a net 0.09% reduction in the average rate, as opposed to the full 0.15%,” states Darren Cook of Moneyfacts.

“Research conducted by Moneyfacts.co.uk has shown that some lenders have increased rates and fees and not brought either back down. Other lenders have reduced rates but increased fees; some lenders have switched from charging a fixed monetary fee to offering a percentage fee. It is imperative that anyone looking for a new mortgage deal makes sure they consider the true cost of the deal and not just look at the headline rate being offered,” he added.

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“It is also debatable whether this sort of approach would help or prolong the transition to better functioning markets,” said James Crosby, the former CEO of HBOS stated. “The authorities would have to consider the extent to which intervention along these lines would expose them to significant financial and legal risks.”

“It is critical that siren voices in the City don’t seduce ministers into using taxpayers’ money to underwrite new bank lending and re-inflate unsustainable house prices,” Vince Cable, a Liberal Democrat lawmaker stated.

“It will be some considerable time before money market investors from outside the U.K. have sufficient confidence to return to our market,” Crosby added. “Such a major source of funding for U.K. mortgages will not be replaced quickly.”

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‘Fixed-rates spiked in June so the repricing we are seeing now are easing rates down to the level prior that spike,’ said David Hollingworth, director of communications for mortgage brokers London & Country. ‘Nationwide only repriced a week or so ago, we are starting to see lenders getting back on track managing how much business they do.’

“Lots of people are coming off cheaper fixed mortgage deals. People are also feeling the squeeze because of increased fuel, utility and food prices. Clients have been pushing out their mortgage term to give themselves some extra breathing space, however in the long term this will cost them more.”

“There is clearly a lot to be said for peace of mind when it comes to financial products, after all, the King of mortgage protection - the fixed rate - is as popular as ever. Yet it is because of the relatively high prices of fixed rates at the moment that this product may well find some homes up and down the country. The product would be best compared to a capped rate mortgage, but unfortunately we find ourselves with no capped rates currently available. The decision therefore rests on what your view on the future of interest rates is,” says Drew Wotherspoon of Charcol.co.uk.

“If you believe rates are going to rocket up in the foreseeable future then there will clearly be some merit in taking this product or a fixed rate, but they really would have to go up by well over 1% in 2 years for there to be value. I do not believe that this is the future direction for rates, quite the opposite in fact. This product will therefore really only suit those who currently believe rates will go down but would value having some security in the background that takes care of all eventualities.”

Melanie Bien of Savills Private Finance stated, ‘Lenders will generally provide a buy-to-let loan only if the property is ready to let. But many buyers end up having to get bridging finance to tide them over until the property can be let or sold. If the development is large, making bridging finance too expensive, a good mortgage broker might be able to arrange development finance at commercial rates. Either way, it pays to be organised in advance of the auction to ensure the cash is in place.”

A local builder Iain Rose concurred, ‘It’s true financing is harder to get and more expensive, but I believe that if you can find the right property at the right price there is still good money to be made. It’s all about research. I had done my sums on the Hammersmith flat and when the bids went above £250,000 I could see profits slipping away.”

Melanie Bien, director of independent mortgage broker Savills Private Finance, said: “The escalating cost of two-year fixed-rate mortgages is bad news for borrowers. It effectively means less choice and less flexibility as they are forced into longer fixes in order to guarantee their monthly mortgage payments.”

Moneyfacts.co.uk’s mortgage expert Darren Cook, said: “The average two year fixed rate stands at 6.75%, the highest rate we have seen in the last 10 years. ‘Customers looking to fix their mortgage for five years are also paying the price as the average rate has increased to 6.72%.”