This is a guest blog by Melanie Bien, director of independent mortgage broker Savills Private Finance. The opinions expressed are her own:

The Bank of England’s decision to cut rates by 1.5 percentage points to 3 per cent - the lowest level in 54 years - is a huge surprise and everyone was caught on the hop by this drastic reduction.

While on one level it is welcome news, particularly for those on base-rate trackers who will feel the full benefit straightaway, it is worrying on another: how bad have things got to necessitate this dramatic reduction?

The next inflation report from the Bank of England will be interesting reading. The reduction will not be an overnight solution to the problems in the mortgage market. But it will start to have a positive effect on the interbank rate - the rate banks pay to borrow money.

These rates have been much higher than base rate: three-month Libor is around 5.7 per cent, for example, explaining why new mortgage rates have been slow to fall. It is unlikely that lenders will reduce their standard variable rates (SVRs) by the full amount but with such a big rate reduction there will be pressure on them to pass on at least some of it, particularly those who passed on nothing after October’s half-point cut.

Those coming up to remortgage will be in for a shock if they think new rates will be much cheaper. A number of lenders - Lloyds TSB, Northern Rock and Woolwich - have pulled their trackers and are set to launch more expensive replacements. Abbey has already priced its trackers 50 basis points higher in anticipation of this reduction in base rate.

Lenders who have cheap trackers are likely to be flooded with applications, which will affect service levels. One way of controlling this is by raising rates and lenders are adopting a herd mentality, copying each other so no-one is left exposed with market-leading rates. Fixed-rate mortgages have started edging down and will continue to do so.

But while rates are falling on some products, criteria are tight and this will take some time to improve. The best mortgage rates are still available to those able to put down at least a 25 per cent deposit or who have this level of equity in their homes. First-time buyers without financial assistance from their parents will continue to struggle to get on the housing ladder.