The problem is your loan to value.

The banks wont lend at a low rate because its not worth the risk.

The risk is, the higher the loan to value the more likely that is to become even higher as the house prices continue to fall. ( estimated another 9-12% for 2009 with a 1.5% increase by the end of 2010 ) So you're still a big risk to the bank regardless of the cost of borrowing the money, its the risk the bank has to bear whilst the prices are volatile.

Thing is, its their stingy lending now not allowing the housing market to stabilise!