The decision has been made by the Bank of England to keep rates at 5.5%. They have resisted pressure to make a change against growing pressure from retailers.

It must have been a tough decision with all the recent signs in consumer spending and the inflationary pressures. A rate cut could have lifted both consumer and general business confidence; it could also have risked fuelling price pressures growing on the back of higher energy and food bills. Npower increased its gas and electricity prices last month and warned other providers would follow suit.

The British Chambers of Commerce said the MPC had missed an important opportunity to underpin confidence and limit the damage to the economy.

“A modest interest rate cut would have alleviated the threats to the banking system and would have helped restore the smooth flow of credit in the economy,” said David Kern, economic adviser to the BCC.

Analysts are expecting the MPC to cut rates in February.

According to the Halifax house price inflation fell sharply at the end of last year, but rising at an annual rate of 5.2%. They still rose by 1.3% in December half the rate from three months earlier. “This mixed pattern of monthly price rises and falls is a typical characteristic of a subdued market,” said Martin Ellis, chief economist at the Halifax.

There are many reasons now why rates need to be cut.

Businesses make capital and investment decisions based on possible growth of their companies. Or they may implement cost cutting measures.

The bad credit mortgages credit crunch has strangled credit; banks are in no mood to ease the pressure at the current rates.   

Economists tend to point to 4.5 to 5% as the neutral point. This is the level at which rates are seen as either slowing the economy or driving it forward. First time buyers might stand a chance of making a decision. Nobody wants to by at the wrong price.

It is hard to overstate the effect they have on consumers. Notwithstanding Halifax’s figures yesterday, the trend looks set for flat prices this year at best. Home-owners, used to the warm feeling from the automatic 10 or 20 per cent appreciation of their homes each year, are going to feel chillier and poorer.

 There is very little danger that a rate cut would produce an upturn in the housing market. Whatever happens to base rate, mortgage bills will remain much higher than then. The banks haven’t fully passed on last month’s cut. Remortgage rates shouldn’t change drastically.

The big question every one will be obsessing over this year will be. “What should i do?” This largely depends on are you a first time buyer or looking to purchase your property with a 100% mortgage.

If your a first time buyer with a deposit or looking to secure your purchase with a 100% mortgage you will be no doubt keeping your finger crossed that house prices are www.clickngomortgages.co.uk/free-mortgage-tools.asp falling.

100% mortgage lenders haven’t all tightened there lending beyond today’s property prices. Birmingham Midshires is just one lender offering reasonable lending multiples to anyone with an average credit rating. 100% mortgage lender Northern Rocks door are still open, but there rates a fees are not market leading but they still have deals to suit certain circumstances.

First time buyers with a deposit still have many options available to them. They now have the vendors on the back foot. It’s a first time buyers market and they should be negotiating a really good deal. You can always increase your offer depending on how much you want the property. Developers looking to shift new properties will be offering incentives for first time buyers to attract them to the property market.

So the media band wagon begins. Confidence has a big part to play in the housing market. So are we all wishing for a crash, or do we want more realistic house prices. The danger is people will start to believe the hype. House price growth is slowing, high street confidence is suffering but what are the facts.  

House price growth this year was recorded at 8.1pc over the last 12 months. The last few months have been more volatile so its hard to get an accurate measurement yet. This due to buyer caution and the negative media headlines. There will be some good opportunities in the coming months as vendors need to move and developers need to achieve sales by offering incentives. This will start to show in house price indices. Better prices will reflect better yields for buy to let mortgages and potential growth over the next few years. Short term wobbles in the market will be ridden out by professional investors.

Which way will rates go?

The market fully expects bank base rate reductions of up to 0.75pc over the next year. If this happens, professional investors using base rate tracker mortgages can expect substantial buy to let mortgage cost reductions over the coming months and rates of around 5pc are likely on many products, before fees. 

Will rents rise?

According to recent RICS, ARLA and Paragon surveys, rents are already up. London rents are already at 15pc and, as usual, this is likely to be preceding significant growth in the rest of the UK regions.

What’s driving growth?

First time buyer mortgages have dropped from over 20pc of the market to less than 10pc. Homebuyers are buying in less but still at a greater rate than property coming on the market. This represents a substantial number of people switching from buying to renting and a disproportionate number of smaller households resulting from frustrated first time buyers unable to get onto the ladder. This will lead to substantial growth in rents for flats and terraced property.

Undersupply or oversupply? 

Government’s increasing targets for new housing indicate there is a massive undersupply of property in the UK. The talk of oversupply has referred mainly to rented flats in city centres. However, it is now becoming clear that this was a relatively small oversupply and agents in many cities and towns are reporting strong rental demand surges and a rapid reduction in rental accommodation available. Even city centre flats are recovering and rental demand is so far boding well for strong rental growth in the future.

Inflation? 

Competition between the supermarkets will keep inflation under control, oil prices are now dropping and average inflation for the last three months has been bang on target, at just below 2%. Clearly interest rates are now starting to lower following a sharp fall in inflation over the last few months. The Bank of England is on target.

Population & immigration?

Government figures suggest the population will grow 4.4 million by 2014 - that represents an enormous extra demand for housing when there is already a shortage.

Should I buy? 

Rents are rising and opportunities exists to use the current fearful market to your advantage, buying at better prices than has been possible for some years, from forced sellers (some developers and people who need to move house very quickly). Buying cheaply in a strong rental market will significantly enhance yields for buy to let mortgage investors and allow mortgage costs to be covered relatively easily and relatively quickly.

Professional investors in any market act against the crowd. This is the opportunity to think like a professional investor and buy at a time of market pessimism, with a 10 to 15 year plan. What is more, rents will pretty much cover your mortgage straightaway with strong returns already being reported.

Tough market conditions have triggered the fall in house prices. Many first time buyers who in recent times have opted for a 100% mortgage are finding it difficult to secure a mortgage. 100% mortgages criteria have tightened to the point where some lenders don’t want your business.

Asking prices were down 3.2% from November. London suffered the biggest drop of 6.8%. Recent indicators have suggested the housing market is cooling, with the Halifax recently reporting sale prices falling in each of the past three months.

The average house price has dropped more than £7000 now to £232′396. “The substantial drops in asking prices are further confirmation of the underlying trend of more sellers re-adjusting their prices downwards to try and tempt buyers in deteriorating market conditions,” said Rightmove’s commercial director Miles Shipside.

Now the bad credit mortgages crisis has taken it’s effect on house prices. With inflation set to slow even further, credit will be harder to get and putting it past most peoples affordability levels.