Why is HSBC in the news?

In the first welcome piece of mortgage news in months, the world's biggest bank is trying to attract new customers. It says that it will match expiring fixed-rate deals, with rates as low as 4.54 per cent, for those borrowers who have 20per cent or more equity in their home. The deal, which will last two years, is open to applicants for five weeks from Monday.

Is the mortgage drought ending then?

Sadly not. The move should earn HSBC masses of goodwill simply because it is in sharp contrast to what all other lenders are doing. It comes just as Nationwide has increased its typical fixed-rate deal to 7.5 per cent, Abbey pulled its last 100 per cent deal and Alliance & Leicester put up the price of popular deals twice in just three days. Most lenders (including the HSBC-owned First Direct) are locked in competition to avoid new business by tightening criteria or levying high charges.

Can we count on interest rates coming down?

All this bad news has boosted chances of the base rate dropping farther. Capital Economics expects rates to be at 3.5 per cent in mid-2009. But this means lower savings rates for prospective buyers, who need to stockpile bigger deposits. There is also no guarantee that lenders will pass on base rate reductions.

Where is the credit pain concentrated?

The credit agency Experian has reported to lenders on areas where householders are most overstretched and in danger of being left in negative equity if prices slide farther. Areas where householders are close to owing 100 per cent of the value of their home include Sighthill in Glasgow, Woolwich in southeast London and Hulme in Manchester. The areas that should be most immune are Kensington and Chelsea, St Ives and Oxford, where householders on average have almost 70 per cent equity in their home and should have little problem securing good mortgage deals.

What does this mean for house prices?

Halifax house price data out this week painted a gloomy picture: prices tumbled 2.5 per cent in a month, the biggest fall since the last slump. Worse, this deeper-than-expected decline does not fully reflect the effects of the mortgage drought: this will emerge in future months.

Is it a nationwide slump?

No. The Halifax's headlines conceal upbeat details: prices rose in the past quarter in the East Midlands, East Anglia, the North and Greater London. In London, the mood has been bleak, with even the prime market suffering, yet prices have still risen 1.6per cent. Analysis by Hometrack shows prices were hardest hit last month for detached homes in London, terraces in the North and West Midlands flats. But there are exceptions everywhere: despite an oversupply of new flats, first-time buyers Nicola Blackwood and Graham Walker, left, have seen the value of their £178,000 flat in the gh2o development in Glasgow rise by £7,000 in a year.

I'm a first-time buyer. What's the outlook for me?

Paul Holmes, of the website firstrung.com, believes that first-time buyers have been left in no man's land by market conditions: prices have not yet dropped enough to help them, and even if they do, few first-timers can now secure a loan. Aspiring buyers need to sit tight until the situation eases, keep their credit record clean and save as hard as possible.

What if I want to trade up?

It is a good time to sell if you have a type of home that is in limited supply and therefore still in demand, but things are difficult if your property is low quality. If you need to sell quickly, be prepared to price competitively: a “secondary property” that is liable to linger on the market may become the most attractive in an agent's window simply with keen pricing.

Are people still investing in property?

Most of the activity in the market is from those people who need to move for lifestyle reasons - to get their children into school or because they have changed jobs. Agents say that second-home purchases are drying up. But there are also signs of experienced buy-to-let investors returning. Doug Moodie, who owns 60 properties in Falkirk, was forced to sit on the sidelines last year as the market in Scotland boomed. He says: “Other landlords are knocking on our door, asking us to buy their properties. We can do so because we have supportive lenders and a cash pile that we built up last year.”

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