Consider that once you have spent all the money in your possession, you cannot spend it anymore, it only makes sense to use cash for every purchase that you possibly can. In the case of financing, you can spend every penny that you currently have, as well as every penny that you will have in the future. With finance terms, it always seems so simple and cheap. Unfortunately, once the bills start rolling in, between service fees and taxes and other hidden costs, it becomes clear that financing is the kiss of death for many individuals.

David Kuo, Head of Personal Finance at Fool.co.uk, says: “Nobody wants to lose money, especially when they are buying something as important and expensive as a house.

“But trying to predict the bottom of the property market is a mug’s game. It is more important to decide if the house you want to buy is right for you, and if you can comfortably afford to meet the mortgage repayments.

“If you are concerned about negative equity, then the best remedy is to increase the size of your deposit or to step up your monthly mortgage repayments.

“Tea leaves are unreliable at the best of times. So rather than wasting your time reading the contents at the bottom of your cup, spend time trawling through mortgage best-buy tables instead.”

“In the current market conditions the costs of a new mortgage can prove too much of an extra burden to customers.” said Chris Pilling, chief executive at first direct. “Our new fee free offset tracker offers a great mortgage rate with no costs at all, apart from the loan itself.

“Also with the offset facility it means that even if customers only credit their salary every month with no extra savings they will be better off than with the equivalent non offset mortgage at the same rate.”

Shadow Treasury minister Philip Hammond said: ‘Even with this bad news from the euro zone, international investors have lost confidence in the UK and the pound has fallen against the euro. This is one reason why inflation is now higher in the UK than the euro zone. Gordon Brown’s economic incompetence is hitting families in the pocket.’

John Dickie, director of strategy and policy at London First, said: ‘The capital is the engine of the UK economy. Action is needed now to keep the engine running.’ He said ministers should press on with infrastructure schemes including Tube renewal, the East London Line extension and Crossrail.

Darren Cook of Moneyfacts commented, “The average rate on a two-year fixed rate mortgage has dropped from 7.08% at its peak on 11 July to 6.90% today, but typically there is a sting in the tail,” he said. “During the last month the average fee has increased by nearly £100, meaning that borrowers have not benefited as much from a reduction as expected. On a £150,000 repayment mortgage, a £100 increase in fee equates to an additional 0.06% increase in the rate.”

Ray Boulger of John Charcol added, “Two-year swap rates [the cost of lending between banks] are now 1% down from their peak in the middle of June,” he said “So there are increased signs of competition in the market and the big lenders are starting to slug it out a bit.”

“It’s the lesser of two evils,” said Alan Cleary, the managing director of Edeus. “Over the last 10 months the only way we have been able to raise fresh loans is by offering steep discounts to multi-national banks. So instead of offering that to the bank we are dealing with customers directly.”

“The market for selling on the mortgages is almost dead, and they can be sold only at a very distressed price,” said Ray Boulger, from mortgage brokers John Charcol.

However, help for struggling homeowners may be on the way. “In the last week a number of lenders including Halifax, Abbey, Cheltenham & Gloucester, Nationwide BS and Woolwich have all started to reduce their rates,” said Michelle Slade, from Moneyfacts.

‘In the face of the current oil and commodity price pressures, we cannot expect to sustain the benign world of steady growth and consistently low inflation that has characterised the last decade and a half across many developed economies, including the UK,” said Andrew Sentance a member of the Bank of England.

Chancellor Alistair Darling stated, ‘We cannot allow inflationary wage increases. That would mean that everyone, especially people on lower incomes, would suffer.’

CML director general Michael Coogan commented: “The growing popularity of fixed-rate mortgages, despite the relatively high rates, suggests that many borrowers are prioritising certainty in their monthly payments.

“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. We look forward to an early, positive report from the Crosby review on how the market should address these issues with the support of the tripartite authorities”

Darren Cook of Moneyfacts added, “We hope, under the current economic climate, that the polls are correct and no base rate change takes place on Thursday at 12h00 and stays at 5.00%, otherwise an increase might give lenders the opportunity to adjust their SVR well above the base rate movement and wipe out any option of a reasonable last resort.”

David Black, Principal Consultant of Banking for Defaqto.com says: “Lenders have tightened up their lending criteria and the rejection rate for unsecured loan applicants is higher than it has been in previous years with Nationwide reporting that they’re now declining about 60% of applications. Many lenders’ annual reports now say that they’re focussing on the acquisition of better quality business.”

“Looking into the future I do expect to see the pressure on Payment Protection Insurance sales and costs manifest itself in higher interest rates being levied on unsecured loans as lenders lose some of their ability to cross-subsidise loan rates with earnings from PPI sales.”

Michael Ankers, chief executive of the Construction Products Association, said: “The impact on the new build housing market has been more severe than any of us anticipated. To be starting fewer new homes than at any time over the last 60 years illustrates the scale of the problem we now face, especially given recent reports from people like Kate Barker that we needed to increase the number of houses that we build.”

‘With lenders having to pay such a huge price to secure funds and a lag time of a few weeks before this cost is passed on to mortgage customers, the situation is likely to get worse before it gets better,” said Darren Cook with Money Facts.