The base rate interest rate cut announced by the Bank of England early in the month was partly expected but the level of mortgage rate adjustments following on from mortgage lenders was less clear. Normally lenders adjust their mortgage rates in line with base rates changes, but in the light of the recent credit crunch and huge market losses announced by several big banks, many did not expect the base rate cut to be passed onto mortgage payers quite so readily.

A couple of mortgage companies stole a march on their competitors by announcing immediately that they would pass on the rate cut in full, but the Halifax and Nationwide were the only two to act on the day of the cut. Others followed in the days following but the trend was far from unanimous. Even now, several weeks on, many mortgage companies have yet to show their hand.

One explanation is possibly the prospect of a second rate cut early in January. If that happens, then some of the slow movers could be tempted to pass on the second cut and hope their customers forget about the December change, in effect keeping that first 0.25% for themselves.

Some industry watchers are predicting a rate drop to 4.75% by the end of 2008 from the 5.5% level at the moment, while others are suggesting a further full one percent fall in mortgage rates for the year ahead.

The other big change in the mortgage market recently is set to become a significant reduction in the attraction of buy-to-let mortgages due to one or two factors. Firstly prospects of falling property prices mean that buy-to-let owners will need to be much more careful on how they purchase and rent back their properties. With annual levels of 10% capital appreciation to fall back on they didn't need to worry too much about whether rental income covered their mortgage payments and costs. But without that appreciation cushion to rely on, the buy-to-let market could become a lot more perilous for the amateur investor.

Also if mortgage costs on buy-to-let deals become more expensive, due to a tightening of sub-prime lending, then rental income is even less likely to cover costs and those landlords who can't afford to top up on their portfolios in order to pay their mortgages could be forced to sell. It's then that falling property prices will come home to roost. And it's a viscious circle, with a mass sell-off of buy-to-let properties fueling the falling property market even further. Interesting times ahead for 2008.

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