“If prices continue to fall at the pace they have done over the past three months, they will end the year down 15 percent,” said George Buckley, chief UK economist at Deutsche Bank. “With inflation, this means that residential real estate will have lost around a fifth of its value in real terms during 2008.”

“The (UK) housing market downturn seems to be gathering pace which delivers a further blow to consumer spending as the wealth accumulation from the housing market dries up,” said Adam Cole, global head of FX strategy at RBC Capital Markets.

“We expect the next move in the Bank Rate to be down, but the extent to which this will revive the mortgage and housing market is likely to be limited while overall confidence in economic and housing market conditions is low,” said Fionnuala Earley, Nationwide’s chief economist.

Head of Alliance Trust Research Centre Shona Dobbie stated, “Consumers are currently facing the worst financial reality ever in the 11 years of our study. All three of our indexed measurements* of consumer well-being have decreased over the past quarter. Households now have to spend more on their mortgage repayments and council tax bills, combined with the fact that their real earnings are failing to keep up with inflation, and so they are feeling poorer and having to cut back in some areas of spending. These bleak conditions are set to get worse for the rest of the year. The labour market has remained fairly strong up until now, but we predict that this will soften over the second half of 2008 as the number of people claiming unemployment benefit continues to rise.”

Bob Pannell from the CML added, “While there was a small month-on-month increase in activity, it represented a notable decline from a year ago. This continues the weaker picture seen in June and points towards the more subdued levels of lending we are likely to see in the second half of 2008.”

Louise Cuming, head of mortgages at moneysupermarket.com, said: “These are worrying times for tenants, landlords and developers. With the cost of living spiralling out of control, tenants are unlikely to be willing to wear increased rental demands”

She added: “Those landlords wishing to remortgage buy to let properties will find it difficult, with lenders demanding sizeable deposits or charging higher rates. This could force landlords to re-evaluate whether it is worthwhile staying in the sector in the current climate. With property prices falling though, there may well be many landlords having to sell their investment at a loss.”

Michael Coogan at the Council of Mortgage Lenders, said: “The MPC faced a difficult decision today in the face of rising inflationary pressures and a slowing economic outlook.

“Holding the Bank rate is better than raising rates, as one MPC member suggested last month, but a reduction would have been a welcome recognition of the current financial strains on households already struggling with hikes in other living costs. As a result of recent Bank rate reductions, mortgage rates are below their peak at the end of 2007 but many consumers will be looking to the MPC to respond soon to the slowing economy and reducing inflationary pressures.”

Derek Livesey, director at the conversion firm Econoloft, says: “Especially in the South-east, there is not always the garden space for building outwards on ground level, so people are finding no alternative to using the space in their loft. They are still having families but simply cannot afford a bigger mortgage or the cost of moving.”

Jonathan Davis, spokesperson for Housepricecrash.co.uk, states “In the early 1990s, couples would get married and move into a one-bed flat. Then they had children but couldn’t upsize as the value of their home had plummeted. Their lender wouldn’t let them sell at a loss and they couldn’t raise any more money, so they just had to cope. In my view this is exactly what will happen again.”

“Tenants typically pay out more for their energy and power than homeowners. Whether as a total per household or the average per capita, the simple fact is, more of your money goes on fuel,” explained Sean Gardner, director of MoneyExpert. “Theoretically suppliers do not differentiate between renters and homeowners so it must come down to the fact that tenants just don’t think about changing supplier because that responsibility lies with their landlord.

“But if you’re paying more than you should you have every right to ask your landlord to look at switching - it needn’t take long and if you can save money it’s well worth it.”

Michelle Slade, analyst at Moneyfacts.co.uk, comments: “Anyone looking for a personal loan can no longer find rates of less than 7%. Yourpersonalloan.co.uk, which is funded by The Co-operative Bank, has increased its rate from 6.9% to 7.3%. Back in June 2006 rates as low as 5.6% were on offer and even this time last year rates as low as 6.1% could be found. Today the lowest rate on offer is from The AA on its telephone loan at 7.2%.

David Newnes from the Broker Your Move stated, “Buy-to-let will grow this year. Opportunities to invest are ripe for professional landlords able to secure financing. With rising tenant demand comes rising rents, buy-to-let yields will consequently improve. House prices are under pressure at the moment, and there’s scope for buy-to-let investors with collateral to get good deals to expand their portfolios.”

Ray Boulger from John Charcol concluded, “The only real question for borrowers who like the look of this product to ask themselves is whether it is right for them to take a tracker mortgage. I find it difficult to see an interest rate rise of any more than a quarter of a per cent, if at all, before we start to see rates fall off quite considerably next year, so tracker deals are clearly the way to go provided you do not need the absolute security of a fixed rate. Borrowers should also be aware there is a 99 pound non-refundable application fee.” 

“With the banks and building societies struggling to raise money on the money markets, tempting savers has become increasingly important. With fixed-rate investments, the institutions can guarantee that they will have your money for a set period of time, which they can then use for lending on mortgages or personal loans,” stated Rachel Thrussel, the head of Savings with MoneyFacts.

“With rates on fixed-rate bonds continuing to increase for the first time in many years, we have seen all of the top six Moneyfacts.co.uk best buy places being taken up by rates of over 7%. Fixed-rate investments are not suitable for everyone, but for anyone who doesn’t need access to their money for a period of between six months and five years, then rates as high as 7.10% can be found.”