In these volatile and uncertain times in the housing and homeowner loan markets, those individuals who are adventurous enough to dare to dip their toes into the water and start applying for homeowner loans again are still taking an extremely cautious route, with the majority of loan applications being made for fixed rate products.

In fact, the month of June saw a record percentage of homeowner loan applications being made on a fixed rate basis, according to John Charcoal, the UK’s leading mortgage and homeowner loan broker.

John Charcoal statistics show that during June a record 83.1 per cent of all homeowner loans were for fixed rate products, due to the currently low levels of interest rates and the likelihood that rates will increase in the not too distant future.

However, the company also commented that June was probably going to see the peak for fixed rate loans and they are likely to become less popular due to the increase in prices of fixed rate loans from banks and building societies, making them less attractive to borrowers than alternative deals such as tracker rate loans, which have remained relatively stable in their pricing over the past few weeks.

Ray Boulger of John Charcoal said “The relative attraction of fixed rates and trackers has moved towards trackers unless one expects interest rates to start increasing rapidly before 2011. Fixed rates are likely to continue to be the choice of the majority of clients for some time because for many the security offered by a fixed rate is paramount, especially for those on higher loan to values. However, we are recommending trackers to more clients this month, with the focus on low or no early repayment charges as well as the obvious requirement of a good rate and fee combination and possibility of offset facility.”

With the loan industry as a whole shrinking over the course of the past couple of years or so and several loan companies and brokers going out of business due to the effects of the credit crunch, it is quite a refreshing change to see a new service being launched for the loan industry.

The insurance giant Legal and General has announced that it is to launch a loan service for financial advisers and loan brokers to be able to source both unsecured loans and secured loans for their clients from the whole of the market.

The service will be available to those intermediaries who are directly authorised by the Financial Services Authority (FSA) and will be run via Moneio and the L&G website through their “Lending Wizard”. The service is designed to allow advisers to search for suitable loans for their clients from the whole of the market and should be able to suit all customer needs, requirements and risk profiles.

As the system is online, it will allow loan customers to see exactly what APR (Annual Percentage Rate) they will be paying before they apply and also give them an instant decision in principle as to whether or not they have been accepted for the loan.

Ben Thompson of Legal and General said “With personal loans becoming harder to come by, some customers are finding that the advertised APR rates aren’t always the rates offered on application. People are becoming disillusioned and turning to financial advisers for help. Through our service, advisers will be able to search and compare actual loan rates before an application is made, saving their customers’ time and protecting their credit rating. Plus, it’s a new revenue stream for advisers and we are offering some of the best commission rates in the broker market.”

Dinosaurs, Dodos and long term fixed rate homeowner loans, it would appear that all of these things are now extinct as the last of the long term fixed rate loan deal has finally been withdrawn from the market.

The Manchester building society was the last lender to offer a 30 year fixed rate homeowner loan, but now this has been withdrawn, the longest term a borrower is able to fix their loan for is 15 years and even then there is only one lender offering this term, according to research from Moneyfacts.co.uk. The majority of other banks and building societies now have a maximum fixed term loan of 5 years.

At the beginning of last year, there were a total of 8 lenders offering fixed rate loans for 25 years, but these have now all gone completely as such deals are not an attractive option for either lenders or borrowers. This is particularly the case due to interest rates being as low as they are currently.

Realistically, interest rates can only go up in the future and this has to be factored in to the rate when lenders offer long term fixed rates, making these deals more expensive at the outset than other, more competitive, cheap loans. Also, due to the uncertainty in the housing and homeowner loan markets at the moment, borrowers are reluctant to tie themselves into a particular deal for such a long term.

Darren Cook of Moneyfacts said “Raising capital when interest rates are so low is difficult. With so little funds available, lenders are concentrating on their core business of shorter term deals. Britannia building society is the only lender to offer a 15 year deal, but with rates starting at 6.49 per cent, these are likely to be unattractive to many borrowers. Borrowers do not want to be tied in to long term deals and instead prefer to stability in the short term, with the freedom to make crucial changes afterwards.”

It has been a very interesting time for anybody working in the homeowner loan or mortgage sector over the past few months, as many of the product deals from banks and building societies have been changing on what has seemed like an almost daily basis, to reflect the uncertain and volatile situation with the UK economy.

But just to emphasise the point that if a potential buyer sees a loan deal which suits them, then they should grab it quickly, a recent report from Moneyfacts.co.uk has revealed that the average shelf life of a typical homeowner loan product has fallen to just 14 days.

During the month of May this year, the average home owner loan deal survived for around 23 days before being withdrawn, but due to the fact that lenders are increasing their rates on fixed rate loans, this figure has fallen to just 14 days throughout June and it is expected that we will see this time period shorten even further.

Darren Cook of Moneyfacts commented on the trend. He said “It is bad news for consumers that mortgage deals are only appearing in the window for a short period. There are only a limited number of cheaper deals available and before the consumer has a chance to look at them a second time, they are gone.

Libor and swap rates are continuing to prove unpredictable and I would not be surprised if the shelf life is cut even further during the next few months. When the Bank of England cut interest rates by a total of 2.5 per cent within two months back in November and December last year, the shelf life fell to only six days, which is less than the life of a pint of milk.”

The changes in lending criteria within the homeowner loan and mortgage market over the course of the past twelve months or so, has meant that the average loan to value available to a potential borrower has dropped significantly, with the average buyer now needing somewhere in the region of a 25 per cent deposit in order to be able to obtain the loan they require.

This is a particularly difficult prospect for many first time buyers wanting to get onto the property ladder whilst prices are relatively cheap and homeowner loan rates are reasonably low.

According to a recent survey conducted by Moneysupermarket.co.uk, the average first time buyer now requires a deposit of around £32,000, yet only a quarter of potential buyers have managed to save this amount of money. Almost one third of individuals are continuing to rent a house until they have saved up sufficient funds for a deposit, others are hoping that property prices will drop even further, or that we will see a return of 100 per cent homeowner loans.

Many young people are getting their deposit from their parents, either as a gift, or in many cases as a loan. Worryingly however, around 16 per cent of potential buyers are thinking about applying for a bank loan as a means of funding their deposit.

Louise Cuming of Moneysupermarket.co.uk commented on this course of action, she said “Taking out a loan to pay for a mortgage deposit is a dangerous move and must be avoided even if it means you have to delay buying your first home. Anyone who takes a loan is effectively taking out a 100 per cent mortgage through the back door. Not only will the mortgage lender decline the application if it discovers the source of the deposit but it is also a huge risk to the borrower, your monthly outgoings will be higher which means there is a greater chance of you finding yourself unable to keep up with your repayments.”