Although the home owner loan and mortgage market has been struggling to keep its head above water for some time now, one area which is showing significant growth is that of equity release loans and lifetime mortgages, as retired people use the value locked up in their home for a variety of reasons.

A recent survey from the equity release loan broker, Responsible Equity Release, has found that somewhere in the region of 36 per cent of all equity release loans being taken out at the moment are being used to repay existing debt on outstanding home owner loans and mortgages.

The number of people using an equity release loan to repay their previous loans and debts has seen an increase of 31 per cent over the course of last year, compared with the figures for the previous twelve months.

Responsible Equity Release said that the main reason for this trend was due to the fact that more people are getting to the end of their home owner loan to find that their endowment policy or other investment vehicle has not performed well enough, leaving a shortfall on their loan. The other main reason was due to higher living costs which have meant home owners have not been able to afford to make overpayments on their loan.

A further 23 per cent of equity release loan customers said that they were using the funds to help family members who were struggling to pay off their own loan debts, or to help fund a larger deposit for those looking for a new homeowner loan.

Responsible Equity Release said that the number of enquiries they receive had increased by 91 per cent over the course of the past twelve months.

Steve Wilkie of the loan broker said “Five or six years ago, the majority of people releasing equity did so to improve the quality of their retirement, but these days a growing number of equity release loans are bein used simply to make ends meet.”

A large number of potential first time buyers across the UK are currently stuck in rented accommodation, due to the fact that they are unable to afford to buy a house of their own and manage the monthly repayments on a home owner loan or mortgage.

But new research from the Halifax has shown that buying a house and making repayments on a home owner loan is actually significantly cheaper than paying rent each month for the equivalent type of property.

In fact, typical repayments on a home owner loan or mortgage are around 16 per cent, or £116 a month, cheaper than paying rent on a similar property, according to the figures from the Halifax.

In December last year, the average cost of paying a home owner loan on a three bedroom house was £600 per month, whereas the average rent on the same type of property stood at £716 per month.

The Halifax have said that the reason for the drop in the cost of buying a house is largely due to the fact that house prices have fallen significantly since 2008 and that, due to the particularly low base rate of interest from the Bank of England, there is now a wide choice of cheap loans available for potential buyers to choose from.

However, although the monthly loan cost of buying a house is much cheaper than renting, the problem for many would be buyers is still that of being able to raise a suitably large deposit to meet lender’s strict criteria on maximum loan to value levels.

In addition to the large deposit requirement, other fees also include solicitor’s fees and things like valuation fees and stamp duty, which all add to the cost of the home owner loan when buying a house.

However, whilst home owner loan rates remain low and are expected to do so for some considerable time, the average rent has increased at a rate of 9 per cent since 2009.

In recent times, it has been particularly difficult for first time buyers to get their feet on to the housing and home owner loan market in the UK, due to the tough underwriting criteria on affordability laid down by lenders, coupled with the difficulty in raising a large enough deposit to meet maximum loan to value restrictions.

Both the government and banks and building societies have been introducing various schemes and offers to try and encourage potential first time buyers back into the home owner loan market, in an attempt to try and reinvigorate the mortgage and home owner loan market as a whole.

HSBC has just recently announced that it is to set aside at least £15 billion worth of funds for lending on new home owner loans over the course of the next twelve months, for borrowers in the UK, with an amount of £3 billion which is to be set aside specifically for first time buyer loans.

The bank saw their total lending figure for home owner loans increase by around 35 per cent in the first half of last year over the previous 12 months, with a total of £6.7 billion in new residential home owner loans.

The allocated funds for this year are likely to provide somewhere in the region of 150,000 new home owner loans, along with 27,000 new loans to first time buyers.

Martijn Van Heijden, head of loans at HSBC said “While some estimates suggest mortgage lending in the UK will fall this year, HSBC has no intention of closing its doors to customers, nor will we compromise our reputation for responsible lending.”

“This announcement shows HSBC’s commitment to continuing to help people move up or indeed take the first steps onto the housing ladder.”

The last year has been particularly tough for many individuals in the UK with regard to their financial position and managing to stay on top of their commitments such as personal loan repayments, as well as everyday things like food and fuel bills, on top of their home owner loan or mortgage repayments, or rent.

With many financial experts predicting that the economic situation in the UK is likely to become worse over the next twelve months or so, many of those who are already struggling with their loans could find their position completely unmanageable and ace serious loan arrears or even repossession.

A new survey, conducted by the housing charity Shelter, has just revealed the extent of the problem across the country, with the findings that more than one third of people in the UK have spent less on food, or even done without altogether, in order to be able to make their home owner loan or rent payment for the month.

The survey also found that around 22 per cent of people have turned their heating down, or off, so that they could save enough money to pay their loan and keep the roof over their head.

In fact, the results of the survey show that somewhere in the region of 26 million individuals have been struggling with their home owner loans and other hosing costs since 2008, despite the fact that homeowner loans are now at their most affordable level for over ten years, due to the currently low interest rates.

Campbell Robb of Shelter said “These staggering findings show just how many millions of people are cutting back on essentials as the continued squeeze on incomes starts to bite. Every two minutes, someone in Britain is at risk of losing their home. We strongly urge anyone struggling to pay their rent or home owner loan to seek advice as early as possible.”

As loans become harder to obtain, particularly from the main high street banks, many people are looking for alternative forms of funding for the personal loan they require, which has led to a resurgence in the number of Pawn Brokers across the UK.

Pawn brokers have been around for many years and at the beginning of the 20th century, they were the main source of a loan for the working class masses of Britain, offering small short term loans against an item of the borrower’s personal belongings as security for the loan.

By the 1970’s, pawn Brokers had almost died out altogether, with only around 50 remaining. However, recent difficulties in getting a bank loan have caused a huge increase in this area of the loan market, with more than 1,000 Pawn Brokers now operating across the country.

Any personal item can be used as security for a pawn broker loan and the loan is offered without any credit checks, or no adverse credit rating of the loan should default, the item in question is simply sold by the broker to recoup their losses. Typically a Pawn Broker will offer around 40 per cent of an item’s value on a loan.

The average interest which is charged on a pawn broker loan is often around 90 per cent APR (Annualised Percentage Rate) and although this is particularly high compared with a bank loan, for example, they are usually only short term loans and still significantly cheaper than the alternative of a pay day loan.

Des Milligan of the UK National Pawn Brokers Association commented on the change in the type of customers now seen by Pawn Brokers, he said “These new customers could once have relied on the banks to refinance them for a new car loan, say. Now the banks are saying no. small businesses too, are using pawn brokers to pay for stock or wages, until payment comes in.”