With the housing market looking fairly flat at the moment and continuing fears over the future of the UK economy, many individuals who would probably be considering moving house this year are, quite understandably, putting off any decisions for such a large commitment until the markets settle down once more.

As the number of people looking to move decreases, there has been a significant increase in the number of homeowners making improvements on their property. For some, this is an alternative to moving altogether, why go to the expense of moving to a larger house when you can build an extension on your existing home for less. For others, home improvements are a way of increasing the value of the house to make it more attractive to potential buyers and increase saleability once the market recovers.

There are many ways of improving a property, but according to new research, the best way to add value to a property is to increase the amount of living space it offers, either in the form of a loft conversion, extension or adding a conservatory. The most popular of these is the loft conversion, which on average could add almost £23,000 to the value of the house, followed by an extension, which could add on average almost £20,000. The addition of a conservatory typically adds just over £12,000 to a property value.

For home owners who don’t have spare cash lying around to fund this type of project, there is a wide range of lenders who are able to offer home improvement loans. These are relatively easy to obtain as they are secured loans on the property in question and the money from the loan will be spent on developing the property, thereby increasing the value and adding additional security for the lender. Another method is to re-mortgage the property, if there are no redemption penalties on the existing home loan and once again lenders are happy to grant home improvement loans by way of re-mortgage. Finally the existing lender may be prepared to offer a further advance on the existing home loan and it is worth investigating the various options thoroughly before committing to one route.

Banks, Building Societies and other lenders have had a pretty miserable time over the past twelve months, with the effects of the credit crunch severely impacting on their business and their ability, or willingness to grant loans and mortgages to individuals. Many organisations have been forced to downsize their operations, making a large number of redundancies and some lenders, mostly in specialist areas such as sub-prime bad credit loans, have stopped trading altogether.

Lenders are now attempting to recoup their losses and start to turn a profit again by tying customers into other financial products with them, such as current or savings accounts as well as building and contents insurance, life insurance and income protection policies.

This has multiple benefits for the lender, firstly by cross selling additional products, they can derive profit from other areas of business, allowing them to offer more competitively priced mortgage and homeowner loan deals, thereby attracting more new customers and secondly, by providing as many financial products as possible for each borrower, they effectively close out the competition from other providers and are therefore likely to retain their customers for longer.

The Co Operative bank is the latest lender to launch a range of mortgage products where the customer must open a current account alongside their loan in order to benefit from an attractive rate. The Royal Bank of Scotland have a similar scheme, whereby the borrowers salary must be paid into a current account with the bank. This is a particularly clever move by the banks as it allows them access to a vast amount of financial information about its customers, allowing them to target market individuals for additional financial products such as personal loans and savings plans.

Another area which is growing in popularity is offset mortgages, whereby a borrower is able to offset any savings they may have against the balance of their homeowner loan, thereby reducing the overall cost of their mortgage.

A word of warning though, don’t be lured into the clutches of the bank too easily. It is still worth shopping around for the best deal on things like buildings and life insurance, as well as personal loans and credit cards. You could save yourself even more money.

Last week we reported on how the Financial Services Authority (FSA) was planning to investigate the sale of Payment Protection Insurance (PPI) policies, following a large number of complaints from consumers who have been sold such a plan only to find that they are unable to claim on the policy when it was needed, due to the fact that they were ineligible for the benefits the policy provided.

PPI is often sold to borrowers who apply to take out a secured loan or mortgage and is intended to cover the monthly repayments on the loan, for a limited period, should anything happen to the applicant, such as accident, sickness or unemployment. Very often, the loan applicant is sold the policy at the same time as the loan, without being informed that they are able to shop around for this type of cover rather than taking a policy with the lender, which can often be significantly more expensive than an alternative provider.

In fact a recent report from the competition commission revealed that borrowers in the UK have been hugely overcharged for PPI insurance and if individuals had shopped around for the protection, rather than accepting the lender’s quote, they could have saved themselves approximately £1.4 billion over the last year alone.

In a bid to offer assistance and clarification to customers, the FSA has produced comparison tables, which it claims, should help borrowers to obtain a better deal on PPI and also get the cover they actually need. But many experts have complained that the comparison tables are far too complicated, with too many variations on policies to be of any benefit to those who use them and claim that they are more likely to cause further confusion rather than clear matters up.

A spokesman for British Insurance commented “I welcomed the announcement of the FSA launching this service, but these indecipherable tables will be of no use to consumers at all.”

If you are unsure about the type of protection you require for any loans you may have, you should take independent financial advice from a suitably qualified professional who will help you through the minefield of PPI.

Apparently there are three different attitude types of people, firstly there are those who get involved and go out and make things happen, secondly there are those who simply observe and say “look what happened” and thirdly there are those who eventually wake up and say “what happened?” According to a recent survey by the insurance giant Zurich, a large proportion of the population of the UK are residing in the third category, particularly when it comes to their finances.

The research showed that since the onset of the credit crunch, fewer than one third of us have reviewed their financial planning as a result of the economic slow down and over 20% don’t actually believe there is anything to be concerned about and think “credit crunch” is an expression invented by the media.

Of those individuals who do acknowledge that the credit crunch exists, more than a third believe it will not have any effect on their personal circumstances, despite the fact that the cost of living and inflation is rising dramatically, house prices are falling and personal loans and mortgages are becoming more expensive and increasingly harder to be accepted for.

Of those interviewed, over half said that they thought property was still a good investment and they’re probably right, over the long term. When asked about their financial priorities the answers differed between age ranges: for married couples the top priority was still to own their own home, for single people the main concern was to be free of any loan or credit card commitments. Young people said number one was to own a car, closely followed by being debt free. For those in the 45-55 age range again the priority was home, then car then, not surprisingly pension planning. For those nearly at, or entering retirement, the priority was to own their home outright, clear any outstanding personal loans or other debts and to have some savings.

The lowest priority for most age ranges was regular holidays and life insurance. It is quite reassuring to see that most groups considered clearing up their personal loans, mortgages and other debts as a priority, although how many actually do so is probably a different story!

We reported recently about how the Financial Services Authority (FSA) are to investigate the sale of Payment Protection Insurance (PPI) in connection with loans and mortgages, following a high number of complaints from customers who have been unable to claim on such policies as they were not eligible for the benefits claimed for (for example, redundancy cover for a self employed person), due to being mis-sold the policy in the first place.

As a result of the investigation and tightening of the regulations with regard to this area of business, many lenders are finding the number of PPI sales they are making at the same time as arranging a loan for a customer is reducing, due to extra compliance checks leading to applications being rejected.

The main problem with this is that lenders receive a very good income stream from cross-selling PPI with a loan and the commission they receive from the PPI sale often subsidises the cost of the loan, particularly in the case of an unsecured loan, which tend to be for smaller amounts and therefore do not attract the same level of commission as a secured loan.

In order to replace this lost income stream and recoup their losses, it is expected that many lenders are likely to increase the rate of interest they charge on unsecured loans. It is also quite possible that rates on secured loans will increase, for the same reasons, although unsecured loans and probably bad credit loans are likely to see the biggest interest rate increases due the fact that they present a greater risk to the lender.

Finally, as lenders continue to tighten their lending criteria following the credit crunch, a much higher number of applications for unsecured loans and bad credit loans are being rejected. One spokesman for a large lender said that around 60% of unsecured loan applications were now being turned away.