Mortgage rates are coming down at last. Hurrah!

Well, sort of. Woolwich yesterday cut rates on some home-loan deals for the second time in two weeks. This comes after cuts by other big lenders such as the Nationwide and Halifax.

It may be a turning point, but the recent improvement in the wholesale markets that lenders use to fund many of their mortgages could still reverse. And even if things get better from now on, it could be a long time before borrowers can breathe easily again.

The biggest lenders do not expect significant easing of conditions until well into next year. Today Sir James Crosby will submit to the Chancellor his first thoughts on how to improve the mortgage-funding market. But his final proposals will not be unveiled until autumn.

The truth is that the rates being lowered mainly cover borrowers with large deposits. This makes them pretty irrelevant to most first-time buyers.

The reductions say as much about demand as they do about funding costs. The credit crunch forced some banks, such as Northern Rock, to slash new lending, leaving stronger rivals with more business than they could handle.

So they pushed up rates to choke off demand. It worked a treat. The higher rates kicked away the support for house prices, which, according to Halifax figures, have fallen at the fastest rate for 50 years over the past last two months.

For many potential purchasers, the prospect of further steep falls in house prices would prompt them to hold off, however attractive the mortgage deals on offer.

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