There was more evidence of the ”green shoots” of recovery this week as the Nationwide building society published its latest house price survey.

According to the figures, the average price of a property in the UK rose by 1.3 per cent through the month of July, making this the third consecutive month of positive movement in the housing market,  with a 1 per cent increase in prices during June and a 1.3 per cent increase in May this year. The average price of a house is still 6.2 per cent lower than it was at the same time last year, however this figure stood at a drop of 9.3 per cent for the previous month.

Whilst this is good news for the economy and those individuals who already own their own home, many of whom were starting to worry about negative equity on their property against their homeowner loan, the news is not so good for those looking to buy in the near future, particularly first time buyers who will now need to find an even larger deposit and loan to be able to buy a house.

As lenders remain extremely cautious about offering new homeowner loans, it is undoubtedly a frustrating time for first time buyers who may be unable to obtain the loan they require due to a lack of income, or sufficient deposit to meet lenders’ currently low loan to value criteria and many may be seeing homeownership slipping out of their financial reach.

Peter Rollings of Marsh & Parsons estate agents commented on the increase in prices, he said “House prices have rebounded faster than anyone expected, owing to the chronically short levels of supply on the market. It’s a classic case of supply and demand forces at work. But, the threat of unemployment will not go away and as the shortage of supply begins to ease in the Autumn, house prices will return to a more modest rate of growth for the remainder of the year.”

Earlier this week it was reported on how the number of homeowner loans approved by banks in the UK has seen a healthy increase over the past couple of months.

The latest figures also show that there is a similar trend throughout building societies, as loans offered by societies has reached the highest level since June last year. The latest figures from the Building Societies Association (BSA), show that there was a total of £1,976 million offered in new loans during the month of June, which equates to a 30 per cent increase in new business above the figure for May.

Although this seems like good news and a positive step in the right direction, this increase in new loans comes from historically low sales figures and despite a 30 per cent increase in new loans over the course of a single month, the total amount of building society new lending is down on June last year by around 40 per cent and although the situation seems to be stabilising, with annualised loan approval figures of £1.8 billion, this is still 30 per cent lower than at the same time last year.

At the same time, building societies have suffered further losses from people withdrawing savings to pay off their existing loan debts and supplement their income during difficult economic times.

Brian Morris of the BSA commented on the figures, he said “Gross mortgage lending by building societies was just under £2 million in June 2009. Despite this, lending remains at historically low levels and is 40 per cent lower than June 2008. The withdrawal experienced by the building society sector is not unexpected given the very challenging economic backdrop. With rising unemployment, subdued income growth and the official bank rate at an historic low, it is very difficult to attract retail savings.

In addition, there is evidence households are looking to take advantage of the low interest rates to pay off debt rather than save. These conditions are expected to persist into 2010.”

There has been lots of coverage in the financial press recently into the controversial sale and rent back schemes which have been in operation over a number of years in the UK, without any form of regulation to protect people taking out such schemes.

Sale and rent back was introduced to help those individuals who owned their own home, through a mortgage or homeowner loan, but were in the situation of having large loan arrears or a default on the loan and facing repossession from their homeowner loan provider.

Although these schemes are seen as a way of allowing someone to remain in their home by selling it to a company, who clears the outstanding loan amount and then charges the individual rent, sale and rent back schemes offered very little protection for consumers and a large number of people ended up losing their homes despite taking out such a plan.

As a result of this, the Financial Services Authority (FSA) launched an investigation and declared that sale and rent back should be regulated, with new interim rules being introduced on July 1st this year, followed by full regulation by the middle of 2010. This week, the first company has been granted authorisation from the FSA to conduct sale and rent back business. Residential Property Solutions (RPS) has become the first company to achieve authorisation and it is hoped that many more will obtain a license in the near future.

Peter Beaumont of RPS said “I am delighted that RPS has been granted interim authorisation by the FSA and I believe we are one of the first firms to be authorised. As important as regulation is, RPS has gone well beyond the minimum standards required of SRB firms by introducing our own ethical charter. I believe this will help raise standards across the whole industry and I am happy to publish the names of all firms who can achieve the standards specified in our charter. Regrettably, no firms have yet put their names forward, but I am hopeful that other SRB providers will see the wisdom of doing so in due course.”

Mortgage and homeowner loan brokers are becoming increasingly frustrated by the attitude of certain banks and building societies with regard to their changing criteria on homeowner loans, once a client’s application has been approved in principle.

Intermediaries and loan brokers are able to source a suitable loan for their clients on line and then also obtain an agreement in principle for the loan through the lender’s website. But in an increasing number of cases, the lender has then rejected the application further down the line, once an underwriter gets hold of the case, thereby wrecking the hopes of the potential borrower who thought they had been approved for a loan and also the credibility of the loan broker who advised on the case.

One homeowner loan broker, Email mortgages, claims that it now has evidence that banks and building societies are accepting in principle loan offers through their on line system and then passing the case to an underwriter who will scrutinise the application looking for a reason to reject it, by altering the criteria once the application has been made. Email mortgages have said that this attitude is stifling the homeowner loan market and stopping credit worthy individual’s from getting the loan they require.

Michael White of email mortgages said “We have been aware for some time that lenders are risk averse however this has been taken to a new level in recent weeks with the action of some underwriting departments beggaring belief.

We certainly do not suggest that a lender should not have tightened  credit policy in the current environment yet we would request that if the original criterion is not sufficient it should not be changed transparently, for example, by lowering the loan to value, increasing the rates or reducing the income multiples. At least this would provide an up front set of criteria to work from, rather than the present clandestine situation where it has become the norm for some underwriters to impose random status checks on already agreed cases in order to decline a borrower’s application at all costs.”

The effects of the credit crunch and the economic slowdown in the UK has had a huge impact on this country’s banks, building societies and loan companies, particularly when it comes to lending on secured loans and homeowner loans.

Over the course of the past two years there has been a dramatic fall in the number of available loans for home buyers, across all types of different products, but since the recent rise in popularity of fixed rate loan products, due to the current low level of interest rates, one product type which has been hit particularly hard is that of tracker loans and mortgages.

Despite a general improvement in the number of available homeowner loan products over the course of the past six months or so, albeit from a record low level, the number of available tracker loans has continued to fall dramatically over the past twelve months.

According to the latest figures from moneysupermarket.com, the number of available tracker loans has fallen by 81 per cent since last July, as lenders are extremely reluctant to offer tracker loans whilst the market remains as volatile as it currently is and the base rate of interest remains so low. The majority of tracker products which remain on the market have a large margin above the base rate and when rates increase again in the future these could become particularly expensive for borrowers.

Louise Cuming of moneysupermarket.com said “The fall in tracker mortgages highlights how the last 12 to 18 months have seen a complete meltdown in the mortgage market. The figures show that four out of five tracker products available twelve months ago, when the base rate was five per cent, have disappeared.

Whilst it may not be surprising to see lenders pulling these products, it is a stark reminder that lenders call the tune and competition is no longer the name of the game. The flight of borrowers to fixed rates has definitely been precipitated by lenders who have decimated the choice of tracker rate alternatives.”