It's stuck in a vicious circle with people coming to the end of the fixed rate deals.... they'll end up with big mortages that some of them can't afford, followed by the inevitable repossessions, making the banks even more paranoid about lending money, leading to even higher rates.
Prices may be going down but if no-one's willing to pay the bank's rates, the agents will end up with lots of unsold houses on their books which will make it even worse.
IIRC this is what started the American side of it..... quite poor homeowners being mis-sold re-mortages without understanding that the repayments would shoot up after 3 or 5 years.... there's been so many repossessions that in some areas, the banks are the largest property owners by far, with huge numbers of houses that no-one wants to buy.
My fiancee and I were looking to buy this year.... sod that for a game of soldiers, we'll stay renting for now and build up a bigger deposit until things get a bit more stable.