The past twelve months have been an interesting time for the housing and home owner loan markets, particularly for those individuals who either already have an outstanding loan, or perhaps even more so, for those people who have been looking for a new loan to either purchase a new home or remortgage their existing one.

The effects of the credit crunch and the banking crisis, coupled with the recession have had a dramatic effect on the ability to take out a loan, as well as for banks and building societies to be able to offer loans to customers.

For those people who have had an existing mortgage or home owner loan throughout the year, many have seen their monthly loan repayments drop significantly during the first three months of the year, as the Bank of England reduced interest rates to the lowest level ever seen, in fact the majority of people have remained on their existing lenders standard variable rate loan once their initial deal has finished, rather than attempt to look for a better deal elsewhere, as this has usually become the cheaper option.

Others with a tracker or variable rate loan, have in many cases, seen their monthly repayments drop by hundreds of pounds a month, allowing them to either overpay on their loan, or repay other debts with the savings.

For those looking for a new loan, whether it be for house purchase, or remortgage, it has been a more difficult year, as lenders have become extremely cautious about who they are prepared to offer loans to and as a result of this, many people have now been excluded from being able to borrow money where they may have been able to do so a couple of years ago.

For those who are able to get a loan, the costs have become much higher than they previously were and this has put many potential buyers off making the house move they would have liked to. Only in the past couple of months, have rates started to fall slightly and let’s hope this trend continues into 2010, allowing more borrowers back into the housing market.

On the 31st December this year, the current stamp duty holiday is due to finish and many experts are concerned about what effect this will have on first time buyers applying for loans and entering the housing market, as well as the knock on effects on the rest of the housing and home owner loan markets.

Estate agents and loan companies have already seen a decline in the percentage of first time buyers during November and December, following a particularly high proportion of this sector applying for home owner loans in previous months, in order to get onto the housing market and avoid the necessity of paying stamp duty on their purchase.

Despite calls to extend the deadline, or reform stamp duty altogether, from 1st January next year the threshold for stamp duty will revert to its previous level of £125,000, from £175,000, which means that many first time buyers will face an additional bill of £1,750 in addition to all the other costs of buying a house and obtaining a loan.

In response to this, the Yorkshire Building Society (YBS) has increased the cash back deal it currently offers on all its first time buyer loan products, from £500 to 1 per cent of the total loan amount, in an attempt to help compensate for the increased cost of stamp duty. The loans also offer a free valuation and free legal fees and a maximum loan to value of 85 per cent.

Iain Cornish of YBS said “Buying your first home is a very expensive business. We have therefore designed these new mortgages to take some of the financial pressure off first time buyers. There are no fees to pay when they take out the mortgage and the cash back will help cover the cost of the stamp duty, which will be one of the first bills to land on the new door mat.”

This year has been a terrible year for the housing and home owner loan markets and although the figures for numbers of new loans and property sales has increased over the course of the year, the overall figures are still pitifully low compared with even just a year ago.

The amount of gross lending on home owner loans throughout the month of November was £9.2 billion and although this shows an increase form the previous month, it is still 12 per cent lower than it was at the same time last year.

These are the latest figures to come from the British Bankers’ Association (BBA), who have also said that they believe we will not see any realistic increase in growth above current levels in the near future. The annual rate of growth of 4.7 per cent for new home owner loans is well above the October figure which is just 0.8 per cent.

The BBA also said that one of the main reasons for the lack of growth is due to the lack of activity in the remortgage loan market, as borrowers remain on their existing lenders standard variable rate loan.

David Dooks of the BBA said “Household priorities are showing up in the November figures. Demand for new personal loans was weak and people are paying off debt or building savings in response to economic circumstances. In the housing sector, prices have continued to edge up and approvals for house purchase are now back at a similar level to that of two years ago.

Remortgaging activity continues to run at a low level as borrowers revert to low standard variable rates or trackers from maturing fixed rate loans. Lending to non financial companies ticked up slightly in November, having declined in each of the previous two months.”

There has been a growing popularity in the use of log book loans, or bills of sales to give them their correct title, amongst consumers who need to borrow relatively small amounts of cash over a short period of time. Due to the nature of log book loans, they are usually predictably considerably more expensive than conventional personal loans.

As the name suggests, a log book loan is one which is secured on a borrower’s car, with the lender taking the ownership documents, or log book as security for that loan.

Bills of sales were first introduced in 1878, but probably due to the lack of availability of loans from traditional sources such as banks, they have seen a growth in popularity over the past couple of years or so and it is estimated that there have been around 40,000 log book loans granted between April 2008 and March 2009 with a total outstanding loan balance of around £30 million.

There have been many horror stories about people who have taken out log book loans in an emergency situation, only to find that they are unable to repay the debt and see it increase to such a level that they owe more than their car is worth. As a result of such stories and a growing number of consumer complaints regarding these loans, the Department for Business, Innovation and skills has proposed that log book loans should be banned.

The Consumer Minister Kevin Brennan said “These bills of sales are archaic and allow vulnerable people’s goods to be seized without a court order. They were developed in the days of Charles Dickens and don’t meet 21st Century consumer standards. They can encourage people to slip even further in to debt rather than taking control of their finances. We must consider all the options, but it seems they don’t fit easily into a modern consumer regime, which should allow honest businesses to thrive and offer adequate protection for consumers.”

Over the course of the past twelve months or so, those individuals with home owner loans and mortgages on a variable or tracker rate have enjoyed a period of particularly low interest rates being applied to their loan repayments.

For some lucky people with a tracker rate loan, they have ended up paying less than 1 per cent interest on their home owner loan. In summer 2008, the base rate of interest stood at 5.5 per cent and due to the effects of the credit crunch and economic slow down, this has steadily fallen until it reached just 0.5 per cent in April this year, the lowest base rate since in the history of the Bank of England.

Many experts and borrowers alike expected interest rates to increase during 2009, returning their loan repayment costs to pre credit crunch levels, but the extended recession has meant that the Bank of England have maintained this low rate for such a long period of time that borrowers are starting to get used to it. But the Confederation of British Industry (CBI) has warned borrowers that it expects the base rate to increase once again in spring 2010, as the UK leaved recession and the economy starts to recover, eventually reaching a rate of 2 per cent by the end of next year.

Ian McCafferty of the CBI said “The UK Bank rate is forecast to start rising in spring 2010, as the Bank of England withdraws some of the monetary stimulus in order to minimise the risk of undesirable inflationary pressure in the medium term. The Bank rate is expected to reach 2 per cent by the end of next year, with no further rises during 2011, to assist the sustainability of the recovery as fiscal policy begins to tighten.”