The money market rates at which lenders borrow from each other continue to fall to new lows. So will lenders reduce their margins accordingly, meaning cheaper mortgages?

Probably not, which will leave borrowers understandably miffed. If lenders are able to obtain money so cheaply, why on earth aren’t we all benefiting? The problem is that lenders have to repair balance sheets, which means higher margins. Several of them have to repay the taxpayer all that money they were bailed out with, which means higher margins. And, generally speaking, they no longer have the appetite to out-do each other with market-leading rates, which means higher margins.

However, it’s a tale of two markets: the haves and the have-nots. Those with big deposits and clean credit histories can access rates that are the stuff of their wildest dreams (well, that might be pushing it but you get my drift), with two-year trackers from just over 2 per cent and five-year fixes at less than 4 per cent. Everyone else is finding the mortgage market far trickier. The fact that the base rate is at an all-time low of 0.5 per cent has limited bearing on mortgage funding but helps make the situation seem even more unfair.

But let’s put this into perspective. Even if a borrower can’t access the cheapest mortgage rates, anything less than five per cent is still competitively priced. Low interest rates have left us with a distorted view of what is ‘normal’. And shouldn’t lenders make some profit and be a bit picky about who they lend to? Otherwise, they’ll need bailing out again for offering rock-bottom rates to those who can’t repay.

What the market does need is a bit more balance. We’ve gone too far the other way, with lenders far more cautious than is warranted. Ok, so first-time buyers may be more risky than those with bigger deposits, and capital adequacy requirements are such that lenders need more cash in back-up in order to lend to them in the first instance, but without first-time buyers the housing market can’t function properly. The self-employed aren’t necessarily all liars when it comes to declaring their income. And an interest-only mortgage is not necessarily a bad thing but might suit the borrower who has considered how they will repay the capital.

Our mortgage market has long enjoyed a healthy mix of innovation and flexibility. Let’s not lose all that in a knee-jerk reaction to some mistakes made in the past.

Melanie Bien is a director at Private Finance