Following a year of particularly cautious lending from banks and building societies with regard to maximum loan to value ratios, the number of available home owner loan products which only require a relatively small deposit has increased once again during the month of February.

The news comes from new research conducted by Moneyfacts.co.uk, who have seen a significant increase in the number of loan products offering higher loan to value ratios throughout February and even into the first week of this month.

In the space of just the last week, there have been new loan products from seven different lenders which offer up to between 80 and 85 per cent loan to value and although in recent months, these higher loan to value products have been far more expensive than those requiring a large deposit, the interest rates charged on these new loan deals are also starting to become cheaper.

This move shows a growing level of confidence in the housing and home owner loan markets, as banks and building societies start to relax their lending criteria, whilst still maintaining a responsible attitude towards offering loans to individuals.

Although the majority of high loan to value products are aimed at first time buyers, it is now even possible to obtain a loan of 90 per cent loan to value for someone moving house, which was unheard of just a few months ago.

Darren Cook of Moneyfacts.co.uk said “There are a growing number of mortgage providers which are becoming a little more accommodating with their credit criteria and this bodes well for consumers who will benefit from a growing competitive mortgage market. It is pleasing to see that the average mortgage rate is falling at the same time as deposit requirements are getting smaller, but at levels that are still responsible.”

Following a surge of activity in first time buyers entering the housing and home owner loan market towards the back end of last year, numbers are now starting to drop, as many are struggling to be able to afford the cost of a new loan due to the increase in house prices, according to one estate agent.

Marsh and Parsons, based in London, have said that they have seen a drop off in the number of first time buyers purchasing property and applying for loans and they blame rising house prices for pushing up the affordability of property and a home owner loan.

At the beginning of last year, the estate agent said that 17 per cent of all its customers were first time buyers, but by January this year, that figure had dropped to just 10 per cent and in February, the figure had fallen even further.

Whilst estate agents in other parts of the country have experienced a similar situation with regard to first time buyers, largely due to the end of the stamp duty holiday in December last year, this does not apply to the same degree in the London area, as the vast majority of properties are well above the stamp duty threshold of even £175,000.

Between the start of 2008 and April 2009, the average London property fell in value by around 30 per cent, making a home owner loan for first time buyers more affordable in this area, but with prices rising by around 13 per cent over the course of the past twelve months, many are simply unable to afford the monthly loan repayments.

Peter Rollings of Marsh and Parsons said “Central London may not be typical first time buyer territory, but it’s little wonder why. Mortgage lenders now typically require a 25 per cent deposit from first time buyers, meaning they would need to put down over £84,000 to purchase the average London property, realistic for only the tiny minority with substantial parental assistance.”

Following a historically low level of home owner loan and mortgage products at the beginning of last year, the number of available loan products on the market is continuing to increase, according to the latest product index from both Trigold and Mortgage Brain.

The whole of market home owner loan sourcing systems for financial advisers and loan brokers have reported that there has been an increase of 10 per cent in the number of home owner loan products available to potential borrowers, over the course of the past month alone.

The number of available loan products increased from 4,535 to 5,047 by the start of March. The number of products available to advisers and intermediaries increased by 11 per cent, compared with an increase of just 8 per cent for direct from lender loan products.

The figures from Trigold also showed that the number of home owner loans being sourced by intermediaries and loan brokers also increased dramatically, with around 10,000 more loans being sourced for clients in February, than there were during the previous month.

At the same time, the average monthly loan repayment amount has also increased slightly, partly due to higher interest rates on high loan to value products, but also due to individuals applying for a larger loan amount, as confidence slowly returns to the housing and home owner loan markets.

David Aylmer at Trigold commented on the figures, he said “There are currently 3,510 intermediary products on the market, compared to 1,538 direct showing that when it comes to choice intermediaries still have the edge.”

“Even though we are seeing mortgage payments rise, the fact that this is based on larger advances does show a greater degree of confidence in the market. Add to this the fact that we saw nearly 10,000 more sources in February than January and I think we have reason to be cautiously optimistic for business levels in the second quarter.”

With interest rates on home owner loans at a historically low level, where they have been for the past twelve months, there seems to be a reasonable amount of complacency growing amongst borrowers regarding their home owner loan repayment amount and also what rate of interest they are actually paying to their current lender.

New research from Post Office Mortgages has shown that somewhere in the region of 3 million borrowers in the UK have no idea about what rate they are currently paying on their home owner loan or mortgage.

The research found that around 35 per cent of people with a home owner loan are currently on their lenders standard variable rate loan deal, in the assumption that this will be the cheapest loan option for them in the current economic climate and although this may be the case, around one third of these borrowers do not know what rate they are actually paying.

Almost half of those individuals with a standard variable rate home owner loan are aware that they are able to make overpayments on their loan and reduce the balance whilst interest rates are low, yet the majority of these people are not taking advantage of this situation.

Over the course of the past few months, several lenders have increased the standard variable rate on their home owner loan and mortgage products, pushing up repayment levels for many standard rate borrowers.

With the prospect of interest rate rises from the Bank of England on the horizon and a growing number of cheap loan deals entering the market, particularly for remortgage cases, if you are one of the three million people who don’t know what they are paying on their loan at the moment, it could well be in your interests to check the rate and compare it with some of the new deals available on the market.

Since the credit crunch and recent banking crisis in the UK, banks have come under a lot of pressure from all sides regarding their previous irresponsible lending attitudes and offering loans to individuals who had very little chance of ever being able to repay them.

As the UK is now slowly starting to leave recession behind and we are starting to see the first glimmers of economic growth in the country, the Government and the Financial Services Authority (FSA) are looking at ways of tightening up on the regulation of banks, in order to stop a similar situation happening again in the future.

As part of the proposed regulation, banks would have much stricter and tighter requirements placed on them for capital adequacy and liquidity, which means they would be forced to hold more cash in reserve.

In addition to this, regulation could place a ban on certain types of loan, such as self certification loans, as well as restricting lending criteria for potential borrowers through much tighter affordability assessments and possible limits placed on loan to value ratios and income to loan ratios.

Although this course of action will protect borrowers from over stretching themselves in the future, there are many concerns that new regulation could actually stop banks from offering loans to many individuals who would currently qualify for one.

Earlier this week, Lord Mandelson said in a speech, that if regulation on the banking sector became too strict, it could prevent potential borrowers from getting the loans they required and this in turn could be detrimental to the economic recovery of the country and potentially push the UK back into recession.

Angela Knight of the British Banking Association (BBA) welcomed the comments from Lord Mandelson, saying  that banks were already taking action themselves to offer loans responsibly and further regulation should be approached with care and not be too restricting.