This rise in rates I am alluding to is due to two things; firstly, as the storm in the Eurozone does its best to turn itself into a full scale hurricane of a banking crisis, because quite simply the cost of funds looks set to rise and secondly, liquidity issues are once more emerging from the shadows.

Given that almost every report seems to suggest we are heading, if not towards another full-scale recession, but a period of stagnation that feels like a recession anyway, it will come as no surprise that the MPC has decided to print more money, entering into another period of Quantitative Easing, (QE) a month earlier than initially expected. Another £75 billion, slightly more than thought, will be pumped into the system.

On the back of the US’s “Operation Twist”, which in essence involves the Fed selling short-term bonds and, here’s the twist, replacing them with longer term ones, (the result being that as more long-term bonds are purchased interest rates should fall), there was pressure on the Bank of England to do their bit.

As for the Euro issues turning into a banking crisis, we have already seen the first casualty in the shape of the Belgian / French bank Dexia which is about to enter into a Northern Rock style arrangement. Although the Europeans have talked positively about supporting their banks and of course Greece, it seems the markets do not quite believe them and need to see a concrete plan of action.

All this means there is a very high probability that, whilst the UK banks are undoubtedly in a much better position that our Euro counterparts, lending levels will be affected in the coming months. Almost every lender I have spoken to has said the same; unless things change they expect funding costs to rise and therefore mortgage rates on offer will rise accordingly.

With all of this mind and whilst we are experiencing some of the lowest rates for a generation, it does seem that the time to act is now. For those looking to remortgage there are now many products that are available at less than even the lowest Standard Variable Rate and some highly competitive fixed rates.

Tracker products start at 1.98% for 2 years, (the overall cost for comparison is 4.60% APR) and fixes now start at just 1.99%, (the overall cost for comparison is 5.30% APR), which is the lowest 2 years fix anyone can remember, a fantastic 2.69% (the overall cost for comparison is 3.40% APR) for 3 years and 5 year fixes available at an astonishing 3.29% (the overall cost for comparison is 4.90% APR).

Remember most offers are valid for 3 to 6 months, so if Chancellor Merkel et al do get their act together and rates improve again there will still be options.

First tried back in 1961 as an “experiment” whose results are still disputed, this involves the Fed selling short-term bonds and, here’s the twist, replacing them with longer term ones. The result is that as more long-term bonds are purchased interest rates should fall, (it’s a supply and demand thing, sort of).

So whilst the US relies on Chubby Checker to help lift them clear of another dip into recessionary squalor, the question is what affect will it have on us? The markets seem initially to be unconvinced, as whilst the yields of 10 year bonds will fall, recent studies suggest that last time the actual effect on mortgage rates and actual borrowing costs was negligible and, let’s face it, interest rates are already very low, so our problems run deeper.

The key to this policy is that no new money is put into the system, so it is crucially different to Quantitative Easing. If SWAP rates do fall accordingly as a reaction to this then great, but will this actually stimulate more lending to individuals and businesses?

Back at home the Bank of England’s MPC, now all firmly singing from the same hymn sheet, are contemplating a new round of QE themselves to help stimulate things, with November the favoured date for another £50 billion or so.

As far as the beleaguered UK housing market is concerned there are deeper issues still and we need some radical thinking and one or two experiments of our own.

Housing policy needs a radical overall, builders need to be supported, a North-South divide is getting more and more pronounced and the social issues that arise with a population unable to move are far reaching. Local Authorities are struggling to meet their social housing allocations and homelessness continues to grow, which is shameful in this day and age. Housing is in danger of being the preserve of the well off or the fortunate.

The strange thing about our industry, however, and one that is contradictory is that it feels better. Is that just because broker numbers have fallen so dramatically that there is more to go round? Most brokers I speak to say that things have picked up – is that just a London thing?

One pleasing aspect for us brokers is not just the fact that lenders are now tapping us on the shoulders and asking for more business but the return of the smaller building societies who, not able to just compete on price, are looking for new ways to lend again.

These lenders are able to eschew the frustrating tick box mentality of those banks who claim to offer the very best rates, (the reality being that clients are victims of the long, drawn out, “Yes, Yes, er No” approach), and instead offer the ability to discuss trickier cases with a real decision maker on day one.

If the property market is to kick forward once more, then this lending is essential in the new world where credit and risk rules the roost.

Whilst the threat to all of us is a second retreat by lenders triggered by, for example, a further disintegration in Europe or the mighty US twisting too far we all end up shouting, we need to make sure that as an industry we are heard louder than ever.

We need new ideas and some radical thinking to meet the challenges we face.

This was contradicted by a Rightmove report that stated that First-Time numbers were dropping seriously, with only 23% of those looking to buy in the next 12 months being first timers, whilst 7 out of the 11 UK regions now in “first-time buyer blackspot” territory. The exception was of course London, which was still holding up.

Summoned to the BBC on Saturday to try to explain this, my view is that whilst the way the media report these stories sometimes blurs the differences, they are actually measuring different things, with the CML looking at actual loans taken last month and Rightmove looking at those who intend to buy.

So, having just come out of a more active period, which is reflected in the CML stats. for last month, we are now entering a quieter stretch, with the summer lull exacerbated by the financial situation in recent weeks. Therefore, the forward-looking Rightmove stats. are also not so surprising.

In other words, both surveys are correct but you can see how the average consumer is easily confused when faced with contradictory headlines on separate days.

There is some definite good news however, with Halifax indicating that first-time buyer affordability is at its highest since 2003.

On top of this, Moneyfacts has reported that the number of products available at higher Loan-To-Values, (LTV’s) are the highest since the crises began. In February 2009 there were just 3 products available at 95% LTV, now there are 35; whilst the number of 90% LTV products are up from a low of 71 to reach 275, representing a good deal of choice.

The cost of such products have also steadily reduced over the past few months and whilst they may appear expensive at first glance compared to the low Bank of England Base Rate, historically speaking these are still competitive deals.

Whilst affordability and choice seem to be improving the issue is still the number of properties available and the number of lenders who, whilst advertising the higher LTV products, make it difficult to actually obtain them.

The good news from across the pond is that a deal has finally been done in the US to avert a crises, that, let’s be frank, would have been a disaster to everyone. Although the “right wing nutters” from the Tea Party could still do some damage the markets seem to have been calmed – for now.

Here in dear old Blighty things have been relatively boring this weekend compared to previous weeks which is somewhat of a relief. Lenders are still improving rates and we are now seeing a welcome return to the fray of the oft-forgotten regional Building Societies.

Their return is most welcome and shows that things really are looking up as the likes of Newcastle, Leeds, Nottingham and the rather brilliant Saffron Walden offer some inventive products.

Of course these Societies have not actually gone anywhere, but it is noticable that suddenly we are seeing alot higher profile in lending terms from them, joining the likes of Skipton, the lovely Coventry and naturally the fabulous Nationwide amongst others.

In any healthy mortgage market we need a strong showing from both banks and building societies so this is all very pleasing and bodes well for the future.

Meanwhile, jaws dropped when Chelsea Building Society, (although now owned by Yorkshire) announced their latest 5 year fix at just 3.39% – that’s crazy money!

As today is apparently “Yorkshire day” that seems very apt.

Eh up & have a great week.

The question we have been asked most lately is whether to fix or not and I have for a long time now stated that I believe more people should be seeking the sanctuary of fixed rates than actually have done.

Evening Standard at the centre of the media storm

So in a rational and calm way, whilst I believe rates will rise sooner than many they will not go to 5% by the end of the year, here are my views together with some examples of the fixed rates available at present.

I cannot believe that the MPC will be able to “ignore” inflation, which is the only job they are actually detailed to do, for too much longer. Unless things really do get much worse due to deepening Euro issues or some other unforeseen circumstance, just for cyclical reasons I believe as we get closer to 2012 and certainly by mid 2012 and 2013 we will be into a period of sustainable growth.

I suspect that because of the current economic environment rates will creep up rather than shoot up, with the first rise coming by May and ending the year 1% higher than it is now. Remember, the Monetary Policy Committee can always reduce rates again if they need to.

As the markets work ahead of any actual changes it is likely that rates will have to begin rising soon to peg inflation and we will head towards a more “normal” Bank Base of between 4% and 6% over the next 3 years or so. If things overshoot and inflation proves to be even stronger, bolstered by the unknown effects of QE, as an example, then the downside could be even higher interest rates.

We have seen both SWAP rates and therefore lenders fixed rates steadily edge up over the past couple of months and I think this may continue unless something changes in the economic outlook, probably for the worse, that makes everyone believe the recovery really is not coming yet. The best 5 year rate was 3.69% a couple of months ago as an example, now that same lender offers 4.09%.

Those lenders that have not yet increased their fixed rates look set to do so soon. Increased competition from lenders is still muted so unlikely to have an effect of driving down fixes again. There could always be one or two who break the mould to gain market share but they have no need to go too low in this market.

In general the closer we get to a rate rise the higher fixed rates tend to creep, so waiting until an actual rise takes place may be too late for the best products.

Taking a 2 year product, unless you need the flexibility to repay a vast chunk in 2 years time, means that you could be looking to remortgage again relatively quickly in a higher, rising interest rate environment where a 5% or even 6% fix may look competitive!

In other words the risk of losing on a tracker over the next 5 years, as well as the potential downside cost (as there is an unlimited loss), seems to be much greater than the risk of taking a fixed and losing out if rates stay low (as there is a smaller defined loss). Especially, if the difference is only 1% to 2%.

I can only say what I would do myself, and if I could take 5 years fixed at around 4% now I would bite your hand off for it, sit back and relax, overpaying when I could.

Those who managed to get on the 3.69% are likely to be feeling pretty smug!

In terms of products the following are a guide to what is currently available :-

2 year fixed – 2.65% fixed until 02/03/2013, (4.24% APR)

3 year fixed – 3.29% fixed until 28/02/2014, (5.30% APR)

5 year fixed – 3.95% fixed until 30/04/2016, (4.10% APR)

Alternatively Coventry have an interesting tracker rate product starting at 2.25%, (4.30% APR) which is capped at 3.49% until 31/03/2013.

Whilst Brown did not do as badly as polls predicted a month ago it was very clear that he has not been given a mandate to govern. Nick Clegg admitted it was a disappointing night as many who said they would vote Lib. Dem. did not have the courage of their convictions when it counted most. However, with 23% of the vote equating to just 50 odd seats, the issues of the electoral system are glaringly obvious.

Potentially the most disappointed, however, must have been Cameron. This really should have been his election on the back of horrendous crises, Labour gaffes and the most unpopular unelected Prime Minister for many a year.

The fact that they did not walk in says two things. One that Cameron has failed to convince many, or at least many in his team have not come up to scratch, and second, that people do actually want change, but electoral change rather than just the traditional switch from red to blue.

So, as predicted, we find ourselves in Hung Parliament territory, but what does this mean for interest rates?

There have been plenty of scare stories about the perils of a hung parliament, spread mainly by those with political motives. There is, however, no doubt that whilst some other countries do not seem to have an issue working within a balanced parliament, the UK’s previous experience has not been exactly plain sailing.

What is absolutely clear is that the leading politicians now have a grave responsibility. If they cannot put at least some of their differences aside and resort to the Punch & Judy politics that the country has so clearly railed against then we could have issues.

On the face of it, the city reacts very quickly to news such as this and the hung parliament scenario has been expected for many weeks now, so much of the initial “costs” as far as interest rates are concerned have already been price in.

Bond yields may be a little volatile in the short-term, but this has all been expected and they should settle down quickly.

One interesting little point is that actually the Euro problems are working in the UK’s favour! For all our issues we are not Greece. The UK is traditionally stable and even with a Hung Parliament those who need to invest in European bonds, who do not want to take a risk on a Euro denominated region are looking at sterling bonds. This can actually counteract our own issues and have a stabilising effect. Simplistic perhaps, but you get the point.

If a relatively stable coalition is established and work begins in earnest then there is no reason for rates to jump. In fact, a coalition that actively takes the best from each party and works for the good of the country could have a dramatically calming effect.

There are many who are however, sceptical that such a scenario can be achieved. The city hates the uncertainty that weeks of haggling would cause and this could well lead to two worrying scenarios.

Firstly, investors may continue to lose confidence in sterling which if continues too far may mean that interest rates need to be raised in order to defend Sterling. Secondly, the threat of credit rating agencies seeing no particular plan to cut our deficit quick enough could well lead to the nightmare scenario of a loss of our AAA rating, which could also lead to a rise in interest rates.

In fact any prolonged indecision could lead to a number of outcomes and until we see some of the dust settling we could well see mortgage rates start to rise, reflected initially in fixed rate pricing.

However, at the time of writing Mr Clegg has just come out and stated that he would stick to his word and give first option to those who have won the most votes which more than hints at a Conservative / Liberal Pact.

There is a very big question mark over this however, as undoubtedly the Liberals have more common ground with Labour and I would be very surprised if the Conservatives sign away the political system to Proportional Representation. Although Cameron as PM, Clegg Deputy and Cable as Chancellor may appeal to many!

The funny thing is this is actually what many people I have spoken to actually wanted. Parties being forced to communicate and work together for the good of the country. Yes it may be idealistic and yes we may have another election within the next 12 months, but this election shows clearly that the public want a change from the system that has protected the status quo of 2 party politics for too long.

If Mr Clegg does not get what he wants from the Tories, he may well revert to Labour although whether he will work with Gordon Brown looks extremely doubtful.

In summary, it does seem that there is no reason to panic, at least not yet. What consumers should bear in mind however, is that we are closer than ever to the stage when interest rates will rise, whether quickly as a consequence of uncertainty and unrest, or slowly as a natural consequence of economic progression.

Either way, I do not expect that fixed rates will be as low as they are now towards the end of this year, so many people who are concerned about rising rates, who have “won” on a variable rate for the last year or so, are now thinking of quitting whilst they are ahead and opting for the sanctuary of a fixed rate.

The next few days will of course be crucial, but the leaders of the respective parties have an opportunity to act in the interests of the country and restore faith, or continue their stubborn ways and risk the wrath of voters for many years to come.