If proof were needed to show just how turbulent things are in the financial system at the moment, since that time, interest rates have fallen by 2 per cent and last week it was announced that the Consumer Prices Index rate of inflation had dropped to 4.5 per cent.

Many experts had predicted that inflation would start to reduce towards the end of this year and the fact that it has done and also looks set to fall further, has prompted people to think about the likely possibility of the Bank of England cutting the base rate of interest by a further 1 per cent before the end of the year.

For those borrowers with a tracker rate on their home owner loan or secured loan this could mean a monthly saving of around £83 on a typical loan of £100,000.

Although the base rate of interest has fallen dramatically to 3 per cent, the inter bank lending rate, LIBOR (London Inter Bank Offered Rate) still remains higher at 4.15 per cent, although this is continuing to fall, closing the gap with the base rate.

It will only be when LIBOR drops to a comparable level with the base rate that we should start to see some more competitive deals emerging on home owner loans and secured loans. These are likely to be the first type of loan to benefit from the rate cuts, but it could be some time before this filters through to the unsecured loan market.

This has been most noticeable in the mortgage or home owner loan sector, probably because this area has been publicised more than any other, but the same applies to personal loans and credit cards and it would appear that lenders are continuing to restrict their criteria even further.

According to a new report from MoneyExpert.com, somewhere in the region of 75 per cent of all personal loan companies now require the applicant to have a minimum level of income before they will even be considered for a new loan.

Just six months ago, this figure stood at only 68 per cent, which shows lenders are continuing to restrict an individuals ability to obtain credit, at a time when many potential borrowers need a loan more than ever. The same pattern is emerging in the credit card market also, with 47 per cent of all card companies requiring minimum income levels, compared with only 31 per cent at the same time last year.

Sean Gardner of MoneyExpert.com said “Lenders are putting more and more barriers in the way of borrowers as they attempt to keep bad debts under control. Providers of loans and credit cards now not only require good credit histories but increasingly are looking for evidence of a steady income stream and borrowers need to prove they are in work.

While it’s certainly a good thing that those in financial difficulty avoid digging themselves deeper into debt, the recent rise in unemployment figures represents a worrying possibility of many being unable to get access to credit when they need it most.”

On a typical loan of £100,000, a borrower could save in the region of £166 every month due to the recent rate cut, making the monthly budget significantly easier.

However, if a borrower were to keep their secured loan repayments at the same level as they were before the rate cut came into effect, they could make significant savings on the overall cost of their home owner loan over the long term and on average, repay the entire loan a total of six years earlier than they would previously have done.

Drew Wotherspoon, of the mortgage firm John Charcoal said “As interest rates fall, it provides the perfect opportunity for borrowers with trackers to pay their mortgage back quicker, taking six years off your mortgage is something we would all like to do.”

Of course, for those individuals who have other unsecured loans and credit card debts, it may be prudent to use the spare cash each month to repay these debts first, as they are likely to charge a much higher rate of interest than a secured loan and therefore create even larger savings than would be achieved from repaying the home owner loan first.

Once these more expensive debts are cleared, it would then be possible to save even more on the mortgage loan, without spending any additional money each month.

Since the onset of the credit crunch, many individuals have seen the value of their homes decrease steadily over the months and it has become increasingly difficult for any one to obtain finance through a home owner loan, or even any other type of personal loan, as lenders continue to tighten their lending criteria for borrowers.

One organisation, the Alliance Trust, which monitors the state of household finances through its Financial Reality Index, now claims that in general, household finances are now at the lowest level since they started to keep records eleven years ago, due to falling house prices and increasing loan and credit card debt.

The index uses three factors to determine how well off we all are, household budget, economic situation and overall household wealth. The most affected areas are household budget and wealth, with the cost of living rising well above average wage increases to tighten budgets and falling house prices reducing overall wealth. However, it now appears that individuals are starting to adjust their spending to bring their budgets in line with the current situation.

Shona Dobie of the Alliance Trust said “Since the launch of our index, 11 years ago, we have seen a very close relationship between consumer spending and financial reality. Over the past three years, however, this trend has been affected by consumers continuing to spend despite increasingly worsening financial circumstances. We are now at a point where we see signs that consumers are catching up with their financial reality and bringing spending back in line with their means. Over the coming months and quarters, we expect this trend to continue.”

In October there was a reduction of 0.5 per cent, followed this month by an astonishing cut of 1.5 per cent and after much discussion and not to mention a certain amount of pressure from the Government, the majority of banks and building societies, particularly the larger organisations, have been forced to pass on some, or all of these savings onto those customers with home owner loans and secured loans on their properties.

The latest economic outlook for the housing and mortgage loan markets from Capital Economics, has now predicted further cuts in interest rates are to follow over the next few months, despite the recent decreases and estimate that by the end of next year, borrowers applying for a new secured loan could be looking at interest rates of around 3 per cent.

However, this may not be the case for everybody who already has a home owner loan secured on their property. Although existing borrowers are likely to see further reductions in the monthly cost of their loan repayments, many lenders, particularly those offering tracker rates, have applied a collar rate to their products.

This means that the interest charged on a loan will not fall below a certain level, regardless of what the base rate does, although not all lenders have applied this criteria and the level varies significantly across those who have done so. It is therefore worth checking the small print on your home owner loan offer in order to see what applies to your own loan.

At around the same time as Novembers interest rate cut, practically all lenders withdrew all their tracker rate products, until they knew what was going to happen. A couple of weeks later and we are slowly starting to see tracker rates return to the market, although many of these are now set at a higher margin above base rate than they were previously.

Although lower rates are now making secured loans cheaper, unsecured loans still remain relatively expensive and it may still be some time yet before we see these rate cuts filter through to the unsecured lending market.

As from the 30th November this year, the lender is withdrawing from the broker market and the only way to obtain an unsecured loan from the Halifax will be to apply directly to them, either in one of their branches, or online via their website.

For someone who may have already applied for an unsecured loan via a broker, this will be unaffected by the decision and the loan will be processed in the normal manner, likewise new broker generated applications will be accepted up to the end of this month.

The decision does not come as a complete surprise, as the Halifax stopped offering new agencies to intermediaries at the beginning of October, although existing brokers were still able to submit loan applications.

A spokesperson for the Halifax explained the decision by saying that the lender was streamlining its operations within its lending business and this move would allow better support for brokers to deal with more complicated areas of finance, such as home owner loans, secured loans and investments, all of which will still be available to brokers and advisers via the Halifax.

Heather Scott of the Halifax said “Intermediaries core business is in the provision of advice for complex personal financial needs. By streamlining in this way we can more closely focus on the core broker advice business, mortgages, pensions and investments.

We continue to offer one of the broadest mortgage and wealth management ranges available via the broker market. Simple personal loans continue to be available either online or direct.”

The average price of a house also fell once more during the month, suggesting that vendors are finally starting to accept a realistic price if they want to sell their house, although the rate of decrease is slowing down according to the report from surveyors.

The main reason given for the continuing slow down is due to the fact that there is still a severe lack of available funding through home owner loans and secured loans, as banks and building societies continue to withdraw their products from the market and tighten their lending criteria for anyone applying for a new loan.

However, the report from RICS also states that it expects to see an increase in activity over the next three months, as new enquiries from potential buyers rose to the highest level seen in the past sixteen months, coupled with the fact that vendors are now asking more realistic prices and that we should see an improvement in the mortgage and secured loan markets, following the Government’s intervention into home owner loan providers and the recent cuts in interest rates.

All these factors should hopefully restore some level of confidence in the housing and secured loan markets and provide a welcome boost for those involved in them.

A spokesperson for RICS said “Last weeks interest rate cut should certainly help to support the market now that lenders have agreed to pass on the reduction to borrowers. Even so the general lack of mortgage loan finance remains a major blockage in the housing market for a large majority of would be buyers.

Fortunately, many vendors have finally started to accept current market conditions and are dropping their asking prices to achieve a sale. Sales should increase in the coming months as more and more sellers understand that greater realism is the only way to make the long desired move.”

With Christmas now looming on the horizon, many people who have seen their disposable income deteriorate over the course of the last twelve months are starting to panic about how to pay for their family gifts and celebrations and are looking for various ways to raise enough cash to be able to make ends meet.

With this in mind, the Consumer Credit Counselling Service (CCCS) has issued advice and suitable guidance for those individuals who may be struggling with their secured loan repayments and other debts, to try and help them avoid further financial problems and be able to manage their money more effectively.

Rather than attempting to generate extra cash for short term needs, it is more important for someone to set out a realistic budget planner, taking into account all their monthly committed outgoings such as secured loans, credit card payments, household utility bills and insurances. By cutting back on unnecessary items of expenditure and luxuries, it should be possible for most individuals to balance their finances and continue to keep up with their essential outgoings over the longer term.

The CCCS has advised people who are looking to make cuts in their expenditure not to cancel any income protection policies or life insurances they may be contributing to currently, as these should be considered as essential items, especially in financially uncertain times. People should also check to see if they have any entitlement to things such as tax credits or other state benefits and if they are already receiving these, to make sure they are receiving their maximum allowance.

There is usually a fee charged for the transfer of around 3 per cent of the balance, but despite this, it is possible to save a large amount of money on the interest that would have been paid to the previous provider. The problem faced by most people who adopt this approach is that they fail to clear the balance which has been transferred before the interest free period ends and they end up either paying interest once more, or more likely, transferring the balance to yet another provider offering 0 per cent interest.

However, it would appear that credit card companies are finally starting to clamp down on balance transfer deals, as the number of providers offering such services has reduced by 7 per cent over the past few months. Of those card companies who still offer balance transfers, the term is generally becoming shorter, for example six months rather than twelve months.

Once the initial period has expired, the rate of interest charged is now at a much higher rate than it would have been twelve months ago. This shows the more cautious approach which is now being adopted by card companies and their reluctance to take on new borrowers.

For those individuals who use this system, it may be time to alter your strategy and clear the balances of your cards whilst you can do so at cheap rates. For those who are unable to clear their credit card debts, one solution could be to shop around for a cheap loan to repay their card balances.

A debt consolidation loan can work out at a much cheaper rate than that of a credit card and the balance is actually being repaid over the term of the loan. For those with smaller card balances, an unsecured loan may be sufficient, but for a home owner with larger card debts over a number of cards, a secured loan may be more appropriate.

The latest figures from the Halifax on their house price index have revealed that there has been a large improvement in the level of affordability and the average price to income level has fallen to less than 5 times, which is the lowest level seen in the past four and a half years. At the highest point in July 2007, the average person buying a house was looking at 5.84 times their annual income as a purchase price.

The recent cuts in interest rates should also have a significant impact on affordability and all these factors combined should hopefully make it slightly easier for an individual to obtain funding through a mortgage or home owner loan.

Although many banks and building societies are still reluctant to offer secured loans for house purchase, since the intervention by the Government with the recent rescue package, the situation appears to be starting to stabilise and as liquidity is restored to lenders, we will hopefully start to see more home owner loan products returning to the market.

The average price of a house has now fallen by 13.7 per cent over the course of the last twelve months and although this may seem like a large amount to some people, prices are still 22 per cent higher than they were five years ago. Both the housing and secured loan markets seem to be stabilising, with figures for new business in both areas remaining relatively constant for the past three months.