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"The worst of credit crunch may be over" screamed the front page headline of a rival newspaper last week. What prompted this declaration was the fact some of Britain's biggest lenders had lowered their fixed rates and one of these was even Northern Rock.

How many readers would have actually believed this statement remains to be seen.

After all, this headline was followed a day later by a raft of rate rises. It is presumptuous, but I can see why some may think the end of the credit crunch is nigh.

The repricing chaos that marked the mortgage industry in the first four months of the year has died down. In those baffling days rates would come and go in seconds as desperate movers and advisers snapped up the cheapest deal.

In the space of a few weeks the way banks and building societies financed their home loan deals changed, possibly forever. This was truly the credit crunch. But it is far from over.

The reason it is not over is for many households the real crunch has not really taken a bite out of their finances yet. It is a slow, dripping effect. Little by little each month bills will go up: petrol here, food there, and then suddenly they have to remortgage.

It is the sort of thing you only notice once you have run up a significant credit card bill or have accidentally gone overdrawn a couple of times. For most households that has not happened yet.

Sure banks have felt it and shops have felt it. That is because they keep rigorous audit trails and are dealing in billions of pounds. Normality will only be resumed once buyers return and that is only going to happen once confidence is restored.

We are a long way from that happening. A glance in any estate agent window will prove that. Equally, the latest Council of Mortgage Lenders figures show purchases and remortgaging fell by 44 per cent compared with May last year.

Worryingly for mortgage advisers the CML points out this data only relates to approvals and the number of loans for house purchase will fall further still in coming months.

This was compounded by the British Chambers of Commerce, which announced it fears for more than 300,000 jobs and warned a recession could only be months away. Worse still the Treasury is facing a blackhole of £7.5bn in the Budget next year. That can only mean one thing: higher taxes, lower spending and more public borrowing.

It is hardly a glowing half-term report for the economy. This, of course, has a knock-on effect in the housing market. Tighter household budgets and greater levels of unemployment mean more people missing their mortgage payments. This means higher repossessions, more supply of houses, lower prices and so on.

That is definitely not good for confidence and a change in sentiment is going to be the real turning point. Only once homebuyers and banks feel more secure about the economy will the credit market loosen again.

An ivory tower, still on the market

Estate agents are either deluded or they know something the rest of us do not know. A press release from Abbey said one in three agents believe house prices will stabilise by the end of the year.

Bizarrely, the same press release claimed 79 per cent of homeowners are going to have to wait for further house price falls before they make a decision on whether to move. The two do not add up.

Unless we see a sudden plummet in house prices the slow decline will keep going for some time simply because these homeowners are staying away from the market.

With prices slowly falling homeowners will never be confident they have reached the floor. The only other reason they would come back is if credit conditions eased allowing mortgage rates to fall and lending criteria to loosen.

I have heard estate agents blame consumers, banks and journalists (for reporting bad news) but they also have to blame themselves for perpetuating years of rapidly increasing prices.

Not thankful for what you've got

It was great to see Northern Rock's re-entry into the world of competitive mortgage lending. Their two-year fixed rates are not the best but they are fully-flexible and perfect for anyone who wants to rapidly reduce their mortgage bills.

However, that no existing customers can qualify for these is shameful and speaks volumes for the bank's old lending policies. The government is obviously not confident with the quality of the book it took on and is leaving them stranded.