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Our biggest mortgage bank could see trouble ahead and cut back on its lending. Its most ambitious rival jumped into a gap in the market. Turned down by the Halifax? Come to us at Northern Rock. 100 per cent mortgages? 125%? Just sign here. Was this really happening only a year ago? It seems longer. Now the over-eager lender wants its money back, and is bumping up its rates to make the point. You can't afford them? Then pay off your mortgage and try your luck with the Halifax.
The Bank of England, as lender of last resort, has found £28 billion to bail out the Rock and would like some of its own money back as well. Next Thursday the Bank must decide whether to cut its own rate and, if it did, whether that would make any difference.
It can see that its American opposite number, the Federal Reserve, has been firing off rate cuts at machine-gun speed and that none of them has proved to be a silver bullet. It can see, too that what counts is the rate at which banks can borrow money from each other, if they can borrow at all. That rate is well clear of Bank Rate, and until the other day the gap between the two was getting wider.
No wonder, then, that the banks have been keeping their powder dry, and no wonder that those with powder to spare are overwhelmed by would-be borrowers. Even First Direct, backed by HSBC's ammunition store, has had to withdraw its best mortgage offer and keep the second best for its own customers. We might almost be on our way back to the days when, if you wanted a mortgage, you formed up to your local building society, put some money on deposit, asked nicely, and waited.
Not that, even then, you could have borrowed five or six times as much as your earnings - still less, 100% of the price of a house. That would be the road to ruin, for borrower and lender alike. It could only begin to make sense if you believed that the housing ladder was an escalator, and would always carry you upwards. Not so. Sometimes it races away, and sometimes it stops, or goes backwards. Accidents happen when people forget that.
Mervyn King, the Bank's Governor, now thinks that over the next few years, house prices will level out, ending up more or less where they are now. That would make them more affordable, because earnings would have had the chance to catch up. He does not say so, but there would be some bumps and jerks and false starts along the way. Look out for them.
They may upset the true believers who have geared up, remortgaging their houses, buying a flat, mortgaging it and expecting to let it - or rather, to sell it. That would only work if the escalator was working. They would have to sell to another believer. They may have been planning to sell next week, at the new low rate of capital gains tax - that is, if they still have gains to tax. In any market, prices stop rising when the last buyer has been satisfied.
In this market, the new buyers will be limited by what they can afford and by what they can sensibly borrow. It always was an illusion that soaring house prices would make us all rich. Inflation cannot do that. It can only redistribute wealth between the winners and the losers. Now the losers - those who could never afford a house, or the would-be first-time buyer asked to pay a fortune for a broom-cupboard - will have their turn. It has been a long time coming.
So the Bank will cut its rate, if not next week then next month, and again - perhaps more than once - before the end of the year, but meanwhile, says Paul Tucker, its markets director, credit has been getting tighter.
He must be looking for new ways of oiling the wheels. To set the escalator working is surely beyond him, and so it should be. Of course, if money is made cheap and plentiful, that in the end will feed through to inflation - houses included. We saw that in America, when the Fed slashed its rates in the first years of this century. House prices bubbled up, and now the bubble has burst and our own bubble looks shaky.
Tucker and his Bank colleagues will want to do better. If they can bear out the Governor's forecast - more or less stable prices on average over the next few years - that would be quite an achievement. We must hope for it.
