So will the great implosion in banking hit you in the wallet?

Last week we were a hair's breadth from financial apocalypse. A year to the day on which Northern Rock had to be bailed out by the Bank of England, events in the United States started a chain reaction that has had consequences around the world.

It started with the collapse of Lehman Brothers, the fourth-largest US investment bank, and the sudden bailout of Merrill Lynch by Bank of America, causing problems for anyone who had invested in them, particularly financial services companies.

Stock markets plunged around the world. Investors began to wonder which Goliath was next – another with just too much debt to cope with. By Wednesday the US government was forced to come to the rescue of the insurance giant AIG; and in the UK an unprecedented week ended with the merger of troubled HBOS and Lloyds TSB to create its first superbank.

City slickers look to be on the edge of a collective nervous breakdown, and it's probably not over yet.

But the glass towers of the financial districts are a long way from the high street, so what does all this mean for those of us on the ground? Four experts give us their verdicts on what happens next for the UK consumer, and you may not like their predictions.

MORTGAGES

Melanie Bien

director of independent mortgage broker Savills Private Finance

The takeover of HBOS by Lloyds TSB has few implications for the mortgage market in the short run. The deal won't be completed until the turn of the year and the integration of the two groups will take longer still – possibly years.

For mortgage holders with HBOS, it's business as usual, with a fixed or tracker rate continuing as before. Those on the Halifax's standard variable rate (SVR) of 7 per cent will find that this won't rise either as Lloyds has the same rate. But anyone on the SVR should consider remortgaging to a cheaper deal anyway.

There are concerns about competition as, in effect, there is now one fewer lender. Ultimately, less competition does tend to lead to rate rises. But there is nothing fundamentally wrong with the HBOS brands, so it is unlikely that Lloyds will start scrapping any of them. Whether it is the Halifax for mainstream residential mortgages, BM Solutions for buy-to-let, self-certification and sub-prime, Intelligent Finance for offset mortgages, or Bank of Scotland for large loans – each has its niche. Lloyds will want to cut costs, but this is more likely to result in branch closures then a reduced mortgage offering.

Of more threat to mortgage holders is that the interest rate at which banks lend to each other soared last week to nearly 6 per cent – the highest level since early April. This has been caused by the collapse of Lehman Brothers, combined with the HBOS takeover, creating uncertainty as banks' mistrust of each other returns.

The knock-on effect of this is increases in rates on new mortgages, both fixed and trackers. The Halifax is set to pull its deals this week and, at the time of writing, the replacement products had not been announced, though they are expected to be more expensive.

This is disappointing, as rates have been falling in recent weeks. It means borrowers who are coming up to remortgage should consider snapping up a rate they like the look of before it goes up.

Speak to an independent broker about the right deal for your cicumstances, as you can secure rates for up to six months before you need one.

INVESTMENTS

Justine Fearns

head of investment research, AWD Group

With higher inflation, lower interest rates, tougher mortgage conditions, falling house prices and volatile markets, it has been a white-knuckle ride for UK investors over the past few months. And in the past two weeks that ride has got pretty frightening, with some big financial institutions being brought to their knees.

We've had Lehman Brothers, Merrill Lynch, AIG and HBOS; while questions are being asked of many others, including stalwarts on Wall Street and big high-street names in Britain. In addition, there has been a huge injection of cash into the markets from the central banks to help try and calm fears. It has worked to a certain extent, but there is still a lot going on and it will take a while to work itself out.

UK financial institutions are highly regulated and there are buffers like the Financial Services Compensation Scheme (FSCS) to bring comfort to savers and investors. In addition, due to the structure of many investments, such as individual savings accounts, unit trusts and Oeics, investors' assets are ring- fenced from creditors.

For people with money already saved or invested, they should generally leave it where it is, provided they won't need to call on it for a while. This is particularly so for stock-market investors, because history shows that we're not good at trying to time the market and can lose more money coming out and going back in than if we had just left things. Over the past five years, the FTSE All Share has gained 58.6 per cent. Had you been out of the market for the best 10 days in that period, the return would only be 15.5 per cent. Miss the best 40 days and the return would be down to -37.5 per cent

For investors with an ultra-cautious approach, or those approaching retirement, keeping money in cash is probably the best thing, Make sure no more than £35,000 is held with any one institution (see right) and keep hunting for consistently strong rates to try and counter the effects of inflation.

You can adopt the same approach with investment companies; here the maximum compensation limit is £48,000.

For investors prepared to take more risks with their capital, and perhaps those with many years to run on their pension fund, you need to understand what you want to achieve and how much risk you are willing to take. Most would need nerves of steel to put money into the market right now, but there are opportunities and if you don't want to miss out, then drip-feeding money on a monthly basis could be the way forward.

However, an arguably stronger approach is to build a balanced portfolio incorporating a range of sectors and asset classes. This is also a reminder to us that, if in doubt, ask – and don't buy anything you do not fully understand.

SAVINGS

Kevin Mountford

head of savings, Moneysupermarket.com

The merger of Lloyds TSB and HBOS will make little or no difference to consumers; neither bank has a particularly compelling offer on the savings front. It is the likes of Alliance & Leicester, Abbey, Kaupthing Edge, ICICI, HSBC and Barclays that have market-leading products in current accounts, bonds, easy-access accounts or individual savings accounts.

Banks need deposits, so there are plenty of providers out there offering rates that outstrip inflation and the Bank of England base rate. Everyone should be looking for savings and current accounts that pay in excess of 6 per cent. A basic-rate taxpayer needs to be earning this much just to keep pace with inflation.

The fight between institutions for deposits will increase, rates will remain strong and the best buys may get even better.

Meanwhile, the nervousness around the stability of banks means savers are more aware of the Financial Services Compensation Scheme (FSCS) and are moving funds so as not to expose themselves beyond the limit – currently at £35,000, but set to increase to £50,000 – at which the return of their money is guaranteed in the event of a bank collapsing.

The high-rate environment should continue into 2009 until inflation starts to fall, which could then lead to several rate reductions by the Bank of England. At some stage, this will bring down the high customer rates, but they will still outpace inflation and the base rate.

The recent economic turmoil has changed the savings market. Customers are starting to rein in their "buy now, pay later" mentality and are putting money away. But we still need greater incentives from the Government to do so. Along with bumping up the FSCS limit, we need to see tax breaks on interest accrued in savings.

DEBTS

David Black

principal consultant, Defaqto

For some time now, the big banks have been focusing their lending on quality rather than chasing volume and a larger share of the market. Given last week's events, this emphasis can only increase.

We're going to see a significant divide between the creditworthy, who will be able to carry on borrowing as before on personal loans and credit cards, and the uncreditworthy. Those with low credit scores will face a real struggle not only to find a new lender, but also an acceptable rate. For them, many "best buy" tables will become the stuff of fiction as "risk pricing" becomes increasingly prominent in the lending market, particularly for unsecured credit like car loans.

For borrowers, the one bright light on the horizon is the prospect of significant reductions in the Bank of England base rate. But even this will be tempered by many lending products becoming far less reactive to base-rate changes.