Last month the Chancellor of the Exchequer, Alistair Darling, announced that he was considering a number of options to try and help the struggling housing and homeowner loan markets and that one particular avenue to assist potential buyers was a holiday from the payment of stamp duty.

Since this initial announcement, there has been no firm decision from the Government as to whether stamp duty will be abolished for a period or not and, according to the National Association of Estate Agents (NAEA), this indecision is starting to have a negative impact on property sales and loan completions, as potential buyers put off the decision to purchase until they know if they are going to save the additional cost of stamp duty.

In a recent survey of NAEA members, 98 per cent said that the Government’s indecision had caused further damage to the already low level of consumer confidence in the housing market, as many individuals are already concerned about falling house prices and the current difficulty in obtaining a mortgage.

Of those interviewed, 56 per cent of agents said that at least one completion had fallen through and almost one third reckoned they had lost more than two deals due to customers waiting for a decision on the potential tax saving.

Stamp duty is a tax which is levied on property purchase and is charged at a rate of either, one, three or four per cent of the property price, depending on value, on houses above £125,000. Someone buying a house for £260,000, for example, could potentially save £7,800 if stamp duty was lifted. No wonder people are waiting to see what happens.

Peter Bolton of the NAEA said “This just isn’t good enough. The housing market is in a very serious position and we need serious action. The figures show that it is agents and consumers who are bearing the brunt of this indecision and whilst we need a planned and managed response from the Government, we also need it quickly.”

There are a large number of home owners living in the UK today who would like to be able to pay a lump sum off their mortgage or homeowner loan or even repay it altogether, along with many more individuals who would equally like to be able to re-mortgage to a new provider to obtain a better deal on their loan.

Sadly many of these people are unable to fulfil their wishes due to the high level of exit penalties which would be charged on the redemption of their existing loan and many borrowers are unsure of the actual level of charges levied on their particular loan, as the lender has the right within the contract to alter the amount charged depending on circumstances.

The Financial Services Authority (FSA) is now starting to clamp down on a number of lenders who operate variable exit fees on their homeowner loan products.

The financial regulator claims that almost one in three lenders is not following FSA guidelines regarding exit charges, which goes against the principles of good practice, as laid down in their statement of January 2007 and is in breach of the “treating customers fairly” directive.

The FSA is writing to those lenders concerned and expects them to amend their loan contracts and has threatened severe action against any who do not comply.

The FSA said in a statement “We expect lenders to amend or delete the terms in new contracts and not to rely on them in contracts with existing customers. If necessary, we will take further regulatory action. We will continue to monitor closely whether firms’ terms comply with the law and principles set out in the statement. Should it come to our attention that a firm’s terms do not comply, we will consider the extent of the breach and what appropriate action to take. This may include, if sufficiently serious, enforcement or court action.”

We are all aware that the availability of mortgages and unsecured loans has reduced dramatically over the course of the past twelve months due to the effects of the credit crunch, but the full extent of this slow down has just been made apparent by new research released by the price comparison website USwitch.com.

The firm claim that the total amount of money granted in unsecured loans and mortgages has reduced by £11 billion since this time last year, when the credit crunch began and that new lending is still dropping by an average of £2.7 billion every three months.

The worst hit area is in the mortgage loan market, which accounts for around £10 billion worth of the reductions. This is little surprise as lenders continue to struggle to obtain funding in the wholesale market to be able to grant loans and consumers have low confidence in the housing market at present, due to falling prices.

The same trend is apparent, to a lesser degree in the unsecured loan market, with a reduction of around £1.1 billion in new lending, which represents more than 157,000 fewer loans this year than at the same time last year. In the meantime, borrowing on credit cards has soared, as individuals find it difficult to be accepted for a loan, with credit card debt increasing by £717 million in the last twelve months.

A spokesman for U Switch said “In just twelve months, this economic landslide has sent the consumer lending market into disarray. Our research has confirmed that both mortgage lending and unsecured loans are drying up by the day. For those with a perfect credit record, it’s unlikely this will be an issue, but others it could be problematic. In response to this, it seems consumers are turning to credit card providers for extra cash. Whilst this is good news that people can still access extra money if they need it, this is not a sustainable solution for the problem. Ultimately, this has had a huge knock on effect on the housing market.”

When applying for a mortgage or homeowner loan, it seems that the majority of people, whether they are being advised by a professional mortgage broker or not, tend to opt for a fixed rate loan to repay their debt.

In fact, out of all the homeowner loans being paid in the UK at the present time, half of these are on a fixed rate deal and for the age range below 35 years old, this figure rises to 67 per cent.

The logic behind this philosophy is quite simple, take out a cheap loan for a short period with the security of knowing that your repayments will not increase during that time and then simply remortgage to another cheap deal, once the initial period has expired.

But since the credit crunch, the outlook has changed for many individuals on a fixed rate loan, as banks and building societies have withdrawn many of their loan deals and those which remain are now considerably more expensive than the rates from two years ago.

Currently there are approximately 1.2 million homeowners in the UK whose fixed rate deal will be finishing in the next six months and with many of these people not optimistic about finding a comparable deal for themselves, they face the prospect of their homeowner loan reverting to the lender’s standard variable rate, which will be unaffordable for many who are already finding their finances stretched.

Even if they manage to remortgage their home, most will still face a large increase in their payments. Currently the average interest rate being charged on a two year fixed rate mortgage loan is 5.5 per cent. The cheapest rate available on the market at the present time is 6.15 per cent. The research, which has been carried out by Impartial.co.uk, claims that in total, homeowners will see an increase in their mortgage repayments of around £522 million over the next six months.

A spokesman for the company said “Confidence is low in the mortgage market. With so many of the best deals gone since the start of the credit crunch a year ago, those that need to remortgage are worried about the prospect.”

To anyone who takes any amount of interest in the mortgage and loan markets in the UK, it will come as no surprise to learn that the total amount of lending has fallen throughout the course of this year and is set to continue to do so.

With banks, building societies and other lenders still reeling from the impact of the credit crunch, there is very little money available in the wholesale market, which means that loan providers do not have the funding to be able to offer loans at reasonable prices and for those lenders who are in a position to do business, there are very few consumers who are prepared to commit to a new large secured loan or mortgage, due to the uncertainty of the short term future of the housing market, the rising cost of living and worries over the economy and job security.

As a result of these factors, a new report from market analyst Datamonitor has warned that the “future looks bleak” for both loan providers and borrowers alike and predict that by the end of this year, it is likely that the mortgage loan market will have shrunk by almost 20 per cent, with a total lending amount of £293.6 billion.

During the month of July alone, the amount of new lending on mortgage loans has dropped by 27 per cent against the same period last year and there is a further fall of 3 per cent predicted for next year.

The news is not so bad for the consumer credit market however, the sector which accounts for non mortgage related personal loans and credit. This area of lending is only expected to fall by around 3.2 per cent this year, with a total of £199 billion worth of new loans being granted followed by an increase in new lending of 1.4 per cent next year.

To back up these figures, the Council of Mortgage Lenders has released figures which show that new mortgage loans are down for the first half of the year by 18.9 per cent to £149.5 billion, against the same period last year.