Considering that this is the very same behavior that got the banks and credit markets in to the trouble that they’re currently, it only makes sense to be somewhat hesitant about making these types of cheap loans. With so much attention being paid to the extremely volatile financial markets, banking institutions and lenders are hesitant to allow the issuance of these extremely cheap loans even in the case of those who have sterling credit. Due to the fact that these cheap loans are less than productive for lending institutions, they are less plentiful. But for those who have strong credit, they are still available providing that you are willing to work hard to achieve them.

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‘Some daylight has opened up for homeowners in the last few weeks and there is now a much bigger margin between the cheapest rates and lenders’ standard variable rates [the rate you revert to if you don’t remortgage], so those who were thinking of waiting will now want to re-look at remortgaging,’ says David Hollingworth of mortgage brokers London & Country.

‘The danger is that people become indecisive in this market as they wait and see what happens with rates,’ he says. ‘Homeowners shouldn’t forget that it was only in June that rates suddenly spiked by half a per cent, which shows how volatile the current market is,” he added.

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Melanie Bien, director of Savills Private Finance, a mortgage broker, said: “It is only a matter of time before the best rates across the board are available to those with a 50 per cent deposit or equivalent level of equity in their homes.

“The maximum loan-to-value continues to creep downwards on the cheapest rates as lenders try to attract those with significant deposits or equity in their home because they regard them as being lower risk.”

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“The average rate on a two-year fixed rate mortgage has dropped from 7.08 per cent at its peak on 11 July to 6.90 per cent today, but typically there is a sting in the tail.” said Darren Cook, mortgage expert at Moneyfacts.co.uk comments. “During the last month the average fee has increased by nearly £100, meaning that borrowers have not benefitted as much from a reduction as expected.”

He added, “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.”

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Gary Lumby, Yorkshire Bank’s Head of Retail said: “We know people are feeling the pinch right now and want to help make mortgages more affordable. That is why our fee-free switching package is an excellent deal for anyone whose current mortgage deal is coming to an end.

“Instead of homeowners having to switch to a Standard Variable Rate when their mortgage term expires with their existing lender, we will work with them to look for the right mortgage rate and waive the arrangement fee.”

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Ray Boulger of John Charcol commented, “With bank rates likely to be falling again by early next year and additional mortgage funding coming into the market from private equity investment, there are good grounds, contrary to the view of many economists, for thinking that house prices will bottom out in the first half of next year.

“There is still no rush to buy but once prices stabilise, let alone start to creep upwards again, buyers will no longer be in such a strong negotiating position and so there is a good argument for those who want to buy and are able to get finance to start actively checking out the market with a view to buying if they spot a bargain.”

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Ray Boulger, of Charcol, says the fee is worth paying: “Many borrowers will be coming off five-year fixed rates of less than 4 per cent in the next few months, while many others will be coming to the end of two or three-year fixed rates with rates well under 5 per cent. Switching to a new large loan fixed rate without paying a fee will mean paying a rate close to 7 per cent.”

“If you are coming up to the end of your fix, you should start looking for a new deal at least three to six months before you actually need it. If you see a rate you like but are not ready to switch yet, book it. “Rates can be reserved with most lenders for up to six months,” adds Melanie Bien of Savills Private Finance.

Francis Ghiloni, of www.mform.co.uk, said: “Lenders are becoming more cautious about interest-only mortgages because of worries about house prices and our experience is that increasingly borrowers are becoming more cautious too.”

Michael Coogan, director general of the CML, said: “Lending levels continue to be lower than last year and any recovery is still some way away, with little sign of the special liquidity scheme increasing the flow of funds to the industry or lowering the cost of funds as hoped.”

Melanie Bien, director of independent mortgage broker Savills Private Finance, said: “Some lenders have tweaked their mortgage criteria in the past week to reflect tougher market conditions.”

Roger Humber, an advisor with the House Builders Association stated, “We’ve seen an enormous downturn with the rate of sales falling 60% year on year. The issue is not the lack of demand but an absolute lack of mortgages. Until the credit crunch is resolved by a reopening of the wholesale markets from which banks rely on, we’ve got to see a continued low level of house building. Home building levels have got to come down in line with sales.”

Joey Gardiner, also with the HBA added, “This is the danger from expecting the private sector to deliver public policy aims for you - they won’t do it, if it can’t make them any money. Builders won’t build if potential buyers are consistently refused mortgages for new homes. The government also needs to worry about what will happen when the market does finally turn round, but it finds thousands of builders have been laid off, and the industry no longer has the workforce in place to start building again.”

Tim Moss, head of loans at moneysupermarket.com, said: “The rise in payday loans is astronomical and symbolises just how difficult people are finding it to cope day to day. As disposable income is being squeezed through increases in the cost of food, fuel, utilities and general living necessities, these loans are increasingly used to help those on a tight budget.

“Payday loans can be useful as a short-term credit vehicle. They are a bit like taxis -convenient for short journeys, but if you are going a long way, there are much cheaper ways to travel.”