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Despite what lenders have convinced themselves most of those who want to take their first steps onto the ladder are not massively unhappy that deals lending six or seven times income have disappeared.

The fact the credit crunch has led to the collapse of house prices is something most first-time buyers celebrate, it has made buying a home of your own a much more realistic prospect that does not involve having to stretch your salary to the limit.

It is daunting enough to have to borrow four times what you earn; surely that should be enough to buy a roof over your head. For first-time buyers it is now a matter of simply deciding when prices have fallen enough before they make a decision about when to buy.

Apart from the move back to more realistic affordability criteria we have seen the market change massively in the last year. There has been reams of research done showing how average rates for secured and unsecured loans, and all types of mortgages, have increased while savings rates have fallen back again.

We all know what has happened to the wider economy. Inflation seems uncontrollable as it races to 4.4 per cent and there is the risk high street spending will soon drop away to a level that could see big businesses having to cut back further.

For all the banks screaming about their losses in recent weeks, and the huge debt write-offs, it has not passed anyone's attention that they are making more from retail customers.

Despite a huge cut in mortgage volumes and a rise in the number of savers, banks have taken the chance to increase mortgage rates by substantially more than the changes in Libor and Swap rates.

Last August three-month Libor was 6.35 per cent and two-year Swaps were 6.22 per cent. Today they are respectively 59 percentage points and 75 percentage points less yet the margins on trackers from the 10 biggest lenders have been stretched by anywhere between 54 percentage points to a whopping 144 percentage points.

Some two-year fixed rates have fallen but only Halifax's have done so by greater than the corresponding reduction in Swap rates. Alliance & Leicester has increased its two-year fixed rates by 55 percentage points. With a reduction in volumes banks have had to widen their margins because they cannot sell in bulk any more.

But for all the plain economic truth in this it is hard for consumers to stomach when they are facing up to hundreds of pounds added to their mortgage bills, while the banks are making more money from them.Worse still, it is the banks own failings in the money markets that has caused this repayments misery.

While the falls in house prices are great for first time buyers, the problem is that until prices stabilise margins will remain extended. On its first birthday the credit crunch is far from finished. In all likelihood the problems it causes will only get worse as it nears its troublesome twos.

Silent takeover

It must have been hard for those at Barclays to keep their mouths closed last week. After Santander's spectacular results everyone believed Abbey's new found place at the top of the mortgage lending charts would not be overtaken. But Woolwich, Barclays' mortgage lender, knew different.

It had to sit silently for a week with fingers on lips before their results were announced, results that showed they had surpassed even Abbey.

Amazingly it means between them and Lloyds TSB, three lenders have done three-quarters of mortgage lending in the last few months.

"We so desperately wanted to tell everyone," a senior manager from Barclays told me. "We have just steadily built on some strong core products."

It is true, Barclays' top spot comes mainly because of the staggering success of its fee-free flexible lifetime trackers. It has not had to bother with fixed rates to obtain this position. But all that has changed with fixed rates from Barclays arriving last week.

Barclays new fix, which is a market leading rate, seems to be copying the model it used for trackers setting it at 60 per cent loan-to-value. By playing safe like this it really is ticking all the right boxes as a prudent lender.

Other side of the coin

The new inflation figure of 4.4 per cent should be the thing perplexing economists the most. Every time they scream about a cut in base rate in order to help the housing market they neglect to answer the question of what is to be done about inflation.

There seems to be no answer. The Bank of England seems to be hung up on what measure to take too. After all, will hiking the base rate really combat the spiralling food and commodity prices that are causing all these pressures? It is unlikely.

Click here for the online-only edition of Mortgage Adviser. Mortgage Adviser will be back in print on 27 August.