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What does this mean for mortgage rates?

While many investors thought that we had seen the last of the turmoil in the money markets it has returned like one of those hurricanes circling the US. All liquidity has been hovered up by the storm and traders are literally battening down the hatches to ensure they can restrict the damage to their assets.

As we saw when the initial credit crunch issue hit the market there is no confidence in lending to anyone with many questioning who can actually be regarded as 'Blue Chip' when the likes of Lehman Brothers have bitten the dust. What little liquidity there is in the market is now available at sky high rates which will ensure that the flow of mortgage finance is disrupted yet again - what little mortgage finance available will be at significantly higher rates than those quoted just 24 hours ago.

This in turn will see the housing market fall yet further with more and more desperate sellers set to come out of the woodwork. Buyers will likely go on strike (those that have liquidity available) and be able to pick and choose the price they want to pay for properties up for sale. There has been no official word from the government, although the Bank of England has been pumping liquidity into the market to the tune of £5 billion today.

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