The mortgage market is feeling the effects of a credit squeeze brought on by problems in the US financial sector, it has been claimed.

Fallout from the US subprime mortgage lending meltdown - which has seen many lenders have to write off millions in bad debts - is affecting the UK, mortgage broker John Charcol warns.

However, at present the situation may be beneficial to borrowers a spokesman said, as many lenders are dropping rates.

Katie Tucker of John Charcol commented that reduced inflation and previous rate rises may mean that there will be none to come in the near future.

She explains that "it would make little sense for the monetary policy committee to increase the cost of borrowing further at this stage".

This is because discount and tracker rates "are still priced at such that even if base did reach six per cent, variables would still be cheaper than comparable fixed rates".

There have been five interest rate rises since last August, bringing the base rate to 5.75 per cent.

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