“Not all banks have been affected by the global credit crunch in the same way. Among the UK banks, those with less exposure to the US and UK housing markets and greater exposure to Asia have fared relatively well. The key areas to monitor now are the strength of banks’ capital and liquidity positions as well as their exposure to commercial property and specialist mortgage markets where prices may weaken further,” states Tim Gibbens, Global Financials Analyst at Alliance Trust.

“When conditions eventually stabilise, banking stocks are likely to experience a sharp bounce but it may be short-lived. Tough fundamentals such as a relative lack of growth options, pressure on margins from increased competition and still-stretched capital positions will soon reassert themselves.”

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However, Laura Woodward of Haart, the estate agent, said: “Now that property prices have fallen by 15% this year across Nottingham, you are almost guaranteed to achieve a rental yield above 8% in prime areas.” Parents should make the most of tax breaks to maximise returns if their offspring attends university. They could consider buying a student flat on the basis of owning 99% of the property, with their student child having the remaining 1%.

“They could then enter a formal profit-sharing agreement with the child so the profits go to the student, taxed at a low or For example, a higher-rate taxpayer with a £200,000 student property on a net yield of say 5%, providing an income of £10,000 a year, would save up to £3,087 on that income.”

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Director general of SHIP, Andrea Rozario, said: “This success underlines the robust health of the equity release sector, despite the impact of the credit crunch that is having such a negative effect on the mainstream mortgage market. It also serves to highlight the distinctly different forces that drive the equity release market, relative to the mainstream market, including the fundamental pressures of the UK’s ageing population, falling levels of pension contributions and the very high levels of personal wealth held in housing equity.”

He concluded, “Despite the current fall in property prices, the very big increases of the past mean that typically, by far the biggest asset held by people later in life is equity in their home. This latest rise in volumes may have been influenced by people wanting to accelerate their plans to release equity for fear of property prices falling further over time, or it may have been simply the increasing pressure on finances cause by rising prices that are often felt hardest by those in or nearing retirement.”

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“Swap rates having fallen substantially over the last month, with 2 year swaps a whole percentage point down from their recent peak. This has allowed lenders to make sizable cuts in the cost of fixed rate mortgages but it is still too soon to buy a fixed rate as rates are expected to fall further. Borrowers who want or need the security of a fixed rate mortgage need be in no hurry to buy one, but with lenders having cut some tracker rates as well, current rates on the best tracker mortgages are also more attractive than a month ago, especially for borrowers who don’t need to borrow more than 75% of their property’s value. Trackers continue to offer the best value,” stated Ray Boulger of John Charcol.

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Jaime Caruana, counsellor and director of the IMF’s Monetary and Capital Markets Development, said:

“A bottom for the housing market in the United States is not yet visible and the credit deterioration is spreading to even prime mortgage loans. Housing prices are softening in a number of European economies, prompting concerns over future loan losses in the mortgage, construction and commercial property sectors in those countries.”

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Francis Ghiloni, business development director of the mortgage advice website Mform.co.uk recommended: “It is far better to do something such as extending the mortgage term or even moving part of the loan to an interest-only basis than just putting your head in the sand and hoping for the best.

“That’s the way to end up getting repossessed or being forced to sell your house and trade down,” he warned. “As long as the mortgage is not being extended so that you’re still repaying it when you should be retired it can be a sensible way to ride out of the current storms.”

mForm Marketing and business development director Francis Ghiloni says: “Lenders are becoming more cautious about interest-only mortgages because of worries about house prices and our experience is that increasingly borrowers are becoming more cautious too.

“That is not to say that switching to interest-only is necessarily wrong. The worry is when borrowers do not have a method of repaying their loan in place. Coming to the end of the mortgage term and not being able to repay the loan would be disastrous. We would urge anyone contemplating applying for an interest-only mortgage to research the market to find the best possible deals before taking such a step.”

A statement from HBOS stated in part, “We expect the UK economy to slow further in 2008, with a modest rise in unemployment and low interest rates, accepting that inflationary pressures will restrict the monetary policy committee’s ability to reduce interest rates to below current levels. We expect house prices to fall by up to 9% in 2008.

“As previously indicated, asset growth is slowing and the rate of deposit growth is targeted to outstrip that for assets in 2008. We are achieving substantially better pricing on new lending in our key markets and, as a result, the decline in the net interest margin in 2007 is expected to moderate in 2008. We anticipate relatively stable and potentially improving margins in 2009.”

“We have been warning for months of the dangers of allowing this downturn to continue,” said Stewart Baseley, executive chairman at the HBF. “Today’s report is further evidence of the urgent need to get some confidence and fluidity back into the housing market.”

“If the government wants to deliver the homes the country needs, and to avoid the housing market dragging the wider economy into recession, it must act now,” added Mr Beasley.

“Monthly house purchase lending volumes continue to be lower than last yearÕs levels and there will be a further weakening in coming months as recent approvals data has shown,” said CML director general, Michael Coogan.