New homeowner loans and mortgages are becoming more affordable for buyers all the time, according to a new survey from the Council of Mortgage Lenders (CML).

Due to the fact that the average price of a new property has dropped by a significant level over the course of the last twelve months and also that the base rate of interest on loans has fallen by 3.5 per cent over the past few months, home buyers are not stretching themselves financially as much as they were, on the amount which they borrow on a homeowner loan.

On average, a first time buyer who purchased a property in November last year used around 18.2 per cent of their income on loan interest payments and for someone moving home, this figure dropped to 14.4 per cent. These amounts are the lowest they have been since February 2007 and April 2006 respectively.

Apart from the fact that property prices have fallen and loan interest rates have become cheaper, a large reason for these figures is that banks and building societies are only offering loans to low risk customers at a much lower loan to value ratio than previously. The average first time buyer had saved a deposit of 18 per cent in November and a typical mover had a deposit of 32 per cent.

Michael Coogan of the CML said “Affordability is improving for those who are able to access a mortgage, but saving for a deposit will still be a constraint for many would be first time buyers. Borrowers who are benefiting from lower mortgage rates should overpay if they can afford it to reduce their mortgage balance and protect themselves against falling house prices.

And now is also a good opportunity for borrowers on interest only mortgages to switch to repayment mortgages to use this period of low interest rates to start to pay down their loans.”

Over the course of the past twelve months or so, we have seen a constant flow of doom and gloom in the financial news, with regard to the economy and in particular, the housing, mortgage and personal loan markets.

This has caused consumer confidence to drop to an all time low, with people putting off the decision to move house, or apply for a new loan and even stopping spending on the high street, thereby making the situation even worse than it was previously.

However, it now looks as though some level of confidence is starting to return amongst consumers in the UK, as the latest figures show that things have started to improve for two consecutive months now and although confidence still remains low, we have to start somewhere!

There are various reasons for this new optimism, house prices have fallen to more affordable levels and look as though they are starting to stabilise, interest rates on mortgages and secured loans have fallen to their lowest level since the Bank of England started trading, VAT has been reduced slightly as the rate of inflation is reducing towards Government target figures once more.

One expert said “The Consumer Confidence index has improved again this month after the interest rate cut and drop in petrol prices, but continues to hover at near record lows. The crucial question is whether the improvement in this index will be translated into activity on the high street during the January sales.”

Estate agents have also reported an increase in activity, with a noticeable increase in the number of potential buyers passing through their doors in search of a potential bargain over the last month or so, as the cost of buying a home and mortgage loan repayments continue to come down to more affordable levels.

As you may have read here yesterday, the total number of deals available to potential borrowers on homeowner loans has dropped significantly over the course of the past twelve months, with the number of available loans now getting close to figures last seen in 2002.

This drop has impacted across the whole of the homeowner loan market, but one area which has been particularly affected is the high loan to value ratio deals.

New research from Mform has revealed that there are now only ten lenders who are prepared to offer a homeowner loan of up to 90 per cent loan to value, offering a total of 35 different loan products over a two or a five year period and only one building society in the country is offering loans of up to 95 per cent loan to value.

To put these figures into perspective, Mform say that in April last year, there were 405 deals offering 95 per cent loan to value available form 41 different lenders.

Most experts agree that the key to the recovery of the housing market lies with first time buyers, if they re enter the market, then everybody else will be able to move also. But with a lack of high loan to value ratio products, many potential first time buyers are simply unable to afford to be able to buy a house.

Interestingly enough, of all the banks which have benefitted from the recent government funding, the Royal Bank of Scotland is the only one which is currently offering 90 per cent on homeowner loans.

Surely, the government should be forcing these part nationalised lenders to provide the high loan to value deals which first time buyers need to be able to get their feet on the housing ladder and therefore revitalise the housing market across the board.

Anybody out there who has attempted to apply for a new homeowner loan or mortgage over the course of the past few months will be more than aware of just how difficult it is to find a suitable loan at the moment and also what little choice there is for a potential borrower searching for a cheap secured loan.

The full extent of this drop in loan products has just become apparent from new figures which have been released by the intermediary mortgage sourcing software providers, Mortgage Brain.

Mortgage Brain, which is used by a large percentage of financial advisers and mortgage brokers to source homeowner loans for clients from the whole of the market, has just announced that, according to its figures, the number of available loans has dropped to a new all time low.

Only twelve months ago in December 2007, there was a total of 24,094 different homeowner loan products available for a borrower to choose from. By December last year, this figure had dropped to a mere 5,095, which means there are now 79 per cent fewer homeowner loan products than there were just a year ago.

A spokesman for Mortgage Brain said “These figures portray a clear and vivid picture of the decline in the number of mortgage products available to consumers through intermediaries and it’s expected that the market will continue to fluctuate due to the ongoing effects of the credit crunch within the global economy. It is important, however, that we not only look at recent market developments but remember that in 2002 there were less than 4,000 mortgage products available.”

Yet another loan provider has withdrawn from the intermediary and broker market last week, as Cattles, the parent company of Welcome Finance, announced on Friday that it was intending to close its loan broker and intermediary operations at the end of January this year.

It was only a month ago, when the company announced that it was placing a cap on the level of new loan business it would allow from brokers, but that it intended to remain in the intermediary market for second charge loans. However, they also said that they were closely monitoring the situation with all their agencies.

The news on Friday that brokers and intermediaries will no longer be able to have access to both secured and unsecured loans through Cattles will have a huge impact on the loan broker market, as many companies have placed a large percentage of their business with Welcome Finance over the years.

The decision is also likely to make it more difficult for a potential borrower to get the best loan deal they can, as the range of choice within the market has been restricted even further than it was previously.

The departure of Welcome Finance now means that there are only two lenders remaining who offer heavy adverse loans, these are Blemain Finance and First European Securities, although both these lenders offer lower loan  to value ratios than Welcome and are now likely to be inundated with new loan applications, as brokers continue to try and place loan business.
 
The Association of Finance Brokers (AFB) described Friday’s announcement as a “sombre event” for the secured loan intermediary market. Robert Sinclair of the AFB said “The loss of another lender is not only significantly damaging to the brokers left but it will cause harm to the large numbers of consumers who need support in this difficult time.”