Consumers with large mortgages were glad to hear that banks were cutting their interest rates last week.

Despite predictions that the current shortage of credit for home loans was likely to continue until 2010, banks still lowered interest rates as well as relaxing their criteria for borrowing. After Lloyds TSB and Nationwide started the trend last month, Abbey and HSBC have followed suit in the last week, with the latter reducing the interest rate on its two, three and five year deals to 6.43%.

Richard Morea from brokers London and County remarked: "Banks are more willing to lend as rates in the wholesale markets have come down."
The move comes just as an interim report on mortgage funding predicted the credit crunch would affect lending for at least two more years. Sir James Crosby's report was published last week but due to reduced costs in the wholesale market banks have been able to cut their interest rates, giving a lot of consumers some long-awaited good news.