The Bank of England’s decision to cut interest rates to just 2% today, the lowest in its 300 plus years, will come as a relief to some.

But in reality the Bank is near powerless to influence the direction of house prices or the rate of their decline.

There will be some benefits from a rate cut, but they are likely to be weak in the current economic climate.

There will be a reduction in pain for some homeowners. Hopefully this may mean fewer repossessions than might otherwise have been the case.

But many homeowners will see little reduction in their mortgage rates. Meanwhile, what spare cash there is from any cut in mortgage rates is more likely to go into paying off debt than into boosting the UK economy.

The nation is waking up to a very nasty hangover from the debt binge and a “hair of the dog” is unlikely to be the first thought on their minds as they see a plague of unemployment sweeping across the country.

In reality the Bank lost control of the housing market when it narrowly voted to cut interest rates in August 2005. It was understandable emotionally given the London bombings, but unwise in retrospect.

The housing market was showing signs of cooling, but the drop in interest rates appears to have fired the starting gun on a new wave of frenzied house buying.

Today we see the prevailing pace of house price falls creating the reverse of the speculative bubble.

For potential house buyers even at 0% interest rates they are seeing the buying power of their deposit rise by the day. Why buy a two-bed, when we will be able to afford a three-bed in a few months?

For the housing industry this is a disaster, not just because it rips away sales, but also it rips apart their asset base – land.

A fall in house prices creates a much larger fall land prices. The valuations office had an average fall of 15.9% in land prices in the first half of the year. By now that drop will have most likely doubled and some and the future looks even bleaker.

More land write downs by the major house builders are inevitable.

And today’s Halifax figures just add more fuel to the fire that is destroying the fabric of the house building industry.

So it is little wonder that house builders see no benefits from interest rate cuts as was made plain by Bellway chief executive John Watson.

This leaves the private sector highly vulnerable. And it is clear that the new model adopted in recent years by the social sector to cross subsidise their overall operations with cash from home sales is broken. This has left housing associations less able to fund new home building.

Who then will build the homes the Government says the nation so desperately needs? How will we sustain an industry through this current crisis so it is ready to boost building in future years?

The Homes and Communities Agency that came into being this week is talking about taking equity stakes in building homes.

This will have an impact. But even with the resources available it remains likely that the house building industry will shrink to half the size it was just a year ago.

That was when Callcutt was suggesting the house building industry could (just) handle the ambitious housing targets so prized by the Government.

I can only repeat, if house building in Britain is to be spared a disastrous future, it would seem that hefty Government spending is the only option left.