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Since the onset of the credit crunch mortgage lenders have all been hit with the same problem, the cost of funds in the wholesale markets and the retail markets.

Both have become more fiercely competitive meaning that funding costs have increased at astonishing levels over and above Libor.

The key problem for the market has been a complete change in the attitude to credit.

Having come from what were extreme credit conditions where credit was offered too cheaply we are now in another extreme situation where credit is probably too expensive.

Therefore Libor has been at historically high levels over and above the base rate.

This, coupled with a recent fear over inflationary pressure and possible rate rises, has seen the Libor rates push sharply higher.

I suspect tighter controls over the setting of Libor will be a good thing whereby each member will be questioned and need to give a reason for any anomalous rates out with other contributor's levels.

Increasing the number of contributors to the committee will also assist in gaining a better perspective on Libor and should also mean that on an overall basis rate settings should be less susceptible to individual erratic rate sets.

Opening up the governance will only serve to bolster the overall rate setting processes and controls over the daily fixings.

Sandy Luke is treasurer and head of financial planning for Dunfermline Building Society