On Thursday last week, the Bank of England’s Monetary Policy Committee (MPC) announced that the base rate of interest in the UK for loans and savings was to remain at its historically low level of just 0.5 per cent for another month.

Whilst many people with variable interest rates of their home owner loan, often hold their breath every time the MPC make an announcement regarding their loan rate, others have now accepted cheap loan rats as the norm and for those home owner who have bought in the past couple of years or so, many do not know any different and a rate rise on their loan would come as a great shock.

However, the base rate could possibly remain at the same low level until 2016, according to the latest predictions from the Centre for Economics and Business Research (CEBR), due to the fact that they believe that the UK has already fallen back into recession.

The CEBR figures show significant decline in growth over the course of the last three months of last year and predict further contractions in the economy in the coming twelve months, which would certainly force the Bank of England to keep loan rates on hold for this long at least.

Douglas McWilliams of the CEBR said “We take no pleasure in outlining such a bleak forecast, but the world is going through a fundamental change where previously poor countries are industrialising fast. This is good news for them, but some of the growth is at our expense.”

Regardless of these predictions, borrowers should not become complacent about their currently cheap loan rates and should endeavour to overpay on their loans whilst rates are low, in order to reduce their overall loan balance for wen interest rates do eventually rise.”

Over the course of the past few years, it has been particularly difficult for first time buyers to get themselves onto the housing and home owner loan market, partly due to tougher loan underwriting from lenders, but largely due to having to save a much larger deposit than previously, in order to meet lenders’ restrictive maximum loan to value levels.

The only way many young people manage to get themselves accepted for a home owner loan, is if they receive financial support from their parents, either in the form of a guarantee on the loan, or by providing the funds to cover the large deposit requirement.

This system of parental loans and financial support has been dubbed “the bank of mum and dad” and although around 84 per cent of first time buyers under the age of 30 receive some form of financial assistance from their family, there have been calls for the government to do something to relieve the strain on parents, who often can not afford to provide these loans themselves.

Ben Thompson of Legal & General Mortgage club has warned that the Bank of Mum and Dad is unsustainable, as many of these parents are giving their cash to their children, when they realistically need it to provide for themselves and their retirement planning.

Many parents are even taking out loans themselves, or re mortgaging their home to release an equity loan to pay for their children’s deposit, which is clearly placing them at risk of unnecessary loan debt.

Mr Thompson said “In many ways, these parents are robbing Peter to pay Paul and as the financial strain increases on all of us, it may not be too long before the bank of Mum and Dad reaches its breaking point, leaving not only a huge gap in retirement provision, but an already depressed first time buyer sector even more in the mire.”

The Financial Services Authority (FSA) has published its final proposals for the Mortgage Market Review (MMR) today (19th December), which outlines new rules and regulations for the home owner loan market and ensure better loan affordability for borrowers and help borrowers avoid loan arrears and repossessions in the future.

One of the main changes to the home owner loan market will be that lenders must verify the income of any borrower before they are offered a new loan, to ensure that they will be able to afford it over the longer term, which effectively places a ban on self certification loans and fast track loan applications.

In the past, borrowers have been able to state their own income on a loan application, without providing any proof of exactly how much they earn. Whilst this was particularly useful for self employed loan applicants, who often find it difficult to provide full details of their earnings, the system was often abused by borrowers falsifying their income in order to get a larger loan.

The FSA have stressed that the ban on self certification loans and fast track loan applications, where only limited client details are taken, is designed to protect borrowers from financial difficulties with their loan in the future and is not intended to prevent self employed individuals and first time buyers from getting onto the housing and home owner loan market.

In the announcement, the FSA said “Lenders must obtain reliable evidence to confirm the income stated on the mortgage loan application form to ensure affordability assessments are based on fact.”

“This will mean the end of self certification mortgages and also the end of fast tracked mortgages, an accelerated approval process under which verification of income may not be required at the lenders discretion.”

Mortgage and home owner loan fraud has been a problem for banks and building societies for many years, but the situation has become increasingly worse over the course of the past three months, according to the latest figures from the credit reference agency Experian.

Experian’s latest loan fraud index has shown that there has been a sudden increase in the number of fraudulent home owner loan applications over the course for the three months to the end of September this year.

The figures show that around 49 in every 10,000 home owner loan applications in the UK were found to be fraudulent, which is an increase of 53 per cent above the previous three month period and 77 per cent higher than the same time twelve months earlier.

The majority of these fraudulent loan application cases are down to genuine home owner loan applicants looking to buy a house, but falsifying their financial details to allow them to get the loan they want, either by exaggerating their income, or failing to declare existing debts, such as a personal loan repayment, for example.

Credit card fraud also increased over the three month period, by 10 per cent on the previous quarter and 7 per cent for the year, but in other areas of finance and the loans market, fraud is not as much of a problem for lenders.

The personal loan market is still the area of the finance market which is least affected by loan fraud, with the figures remaining static for the three month period at just six cases in every 10,000 loan applications.

The number of fraudulent car loan applications has actually decreased for the fifth quarter in a row, with 21 fraudulent loan applications in every 10,000, a decrease of 49 per cent over the year to date and a 12 per cent decrease on the previous quarter.

Earlier this week, in his autumn statement, the Chancellor of the Exchequer, Mr George Osbourne, unveiled his plans for the immediate future of the UK economy and how he intended to create growth and avoid a further recession.

In his speech, Mr Osbourne said that the government intended to keep the base rate of interest for loans and savings at its current low level of just 0.5 per cent, as any rate rise would have a significantly damaging effect on the UK economy at the moment.

He also said that he wanted to make sure that these low loan rates were passed on to business loan customers and families who are struggling to pay their home owner loan or mortgage.

Mr Osbourne said that any interest rate rise would be particularly damaging to the economy as a whole, as well as individuals, due to the currently high levels of personal debt on personal loans and credit cards.

An interest rate rise of just 1 per cent would have the effect increasing the cost of an average home owner loan by around £1,000, which could push many families over the edge financially. Such a rate rise would also increase the cost of business loans by a total of around £7 billion per year.

As expected, the Chancellor also announced an extension to the enterprise finance guarantee scheme for small and medium sized businesses. The National Loan Guarantee Scheme is designed as a credit easing project with up to £40 billion being made available to provide backing for business loans.

Mr Osbourne said “We’re using the credibility we’ve earned in the international markets to help our domestic economy. New loans and overdrafts to businesses with a turnover of less than £50 million will be eligible for the scheme, so it stays focused on smaller companies.”