Over the past couple of months or so, we have seen large increases in the number of people applying for new home owner loans and mortgages, as banks and building societies begin to ease their lending criteria and start to offer some more competitively priced loan products to their customers, in many cases with higher loan to value ratios than many recent loan deals.

As a result of this, there has been a significant jump in loan applications over the course of the past two months, as people grab a cheap loan deal whilst property prices are still relatively low compared with a couple of years ago.

But according to the latest figures from the Council of Mortgage Lenders (CML), November saw the first drop in loan activity for several months. The total amount offered in new loans during November was £12 billion, compared with £13.3 over the course of the previous month, showing a drop of 10 per cent. The CML say that this is no cause for concern, as there is normally a reduction in home owner loan activity at this time of year, although the drop this year is slightly larger than it has been previously.

Paul Samter of the CML said “There is little reason to expect much underlying change in the coming months. There could be a modest decline in underlying house buying activity in early 2010 due to the stamp duty holiday ending, with activity “bunching” over the last few months of 2009. But seasonal factors are likely to be the dominant factor over the next few months. There has been a modest increase in the availability of mortgage credit recently, including some tentative signs of a few higher loan to value products emerging. But there is no sign of a swift recovery in lending volumes, especially with remortgaging set to remain at subdued levels while low interest rates persist.”

The recent stamp duty holiday on property sales below £175,000 has had the effect which was desired by the Government when it was introduced last year and has encouraged many would be first time buyers to take the plunge and apply for a home owner loan and enter the property market, making a potential saving of £1,750 in stamp duty tax.

In summer this year, first time buyer loans and property sales accounted for 43 per cent of the overall housing and home owner loan markets, as first time buyers bought property before the deadline of 31st December this year is reached.

However, as many experts have predicted throughout the year, the number of first time buyers applying for home owner loans has dropped suddenly as the stamp duty holiday reaches  its end. The National Association of estate Agents (NAEA) has reported that the number of first time buyers has plummeted in November this year, with only 19 per cent of sales and loan applications being made up of this vital sector of the market.

This is the lowest level of first time buyer activity since December 2008, when the figure was just 11 per cent and leads to worries that this drop in activity could affect other areas of the housing and home owner loan markets.

Gary Smith of the NAEA said “The decline in the first time buyer segment is exactly what the NAEA anticipated and warned the government about some months ago. Any tax holidays result in a distortion in the market and in the case of stamp duty needed to be carefully managed and phased out rather than falling off a cliff. Unfortunately as first time buyers often form the foundation of selling chains there could be repercussions throughout the sector.”

There is an expression that an Englishman’s home is his castle and to some extent this is probably true. In this country we place more store on owning our own property than many of our European neighbours and in a recent survey conducted by the insurance company Scottish Provident, more than half of those people interviewed said that they thought it was very important to own their own home in order to maintain a reasonable standard of living and once they have become property owners, people do not want to face the possibility of losing their “castle”.

The survey also found that, as a result of this feeling of security from owning a property, many individuals are reluctant to take out secured loans against their home, as this increases their exposure and risk of losing it, particularly in the current economic and financial situation in the UK.

In a similar vein, many people are putting off buying a new home at the moment, due to the fact that the high cost of property means that they would be forced to take out a large home owner loan in order to buy it and a growing number of potential buyers do not want to commit to large loan repayments during the current recession.

The report also said that, although people in the UK rate home ownership as highly important, financial security and stability are more important at the moment and as a result of this, more home owners are remaining in their existing homes and concentrating on repaying their existing home owner loan and other debts rather than taking on a new, large loan just to own a bigger house. Susan Barclay of Scottish Provident said “These findings underline how there is far less desire to get onto the property ladder than there once was.”

Many borrowers with a home owner loan or mortgage in the UK have had an early Christmas present this year, in many cases as early as April, since the Bank of England reduced the base rate of interest for loans and savings to a record low level of just 0.5 per cent, where it has also remained for the rest of the year.

As a result of this, those people with a variable rate on their home owner loan, or those coming to the end of a fixed rate loan deal, have enjoyed some significant savings on their monthly repayment amount.

According to the latest figures from the Bank of England, somewhere in the region of 45 per cent of all borrowers with a home owner loan were on a variable rate deal, or their lenders standard variable rate and of these people, around 25 per cent have seen their loan repayments fall by more than £200 every month. Approximately half of all borrowers on a variable rate have saved more than £100 per month, with the average saving across all variable rate borrowers being £130.

When it comes to loans for remortgage purposes, over the course of the previous twelve months 14 per cent of borrowers were able to switch their loan for one with lower repayments, although the average monthly saving was only around £39, due to the much reduced standard variable rate loans from their existing lender.

It is little surprise therefore that a large number of borrowers coming to the end of their initial loan deal have opted to remain on their lenders standard variable rate, rather than look for a remortgage deal. Over the course of this year, 25 per cent of these borrowers have remained on the standard variable rate loan with their existing lender, compared with just 7 per cent during the previous year.

After an extremely poor year for the housing and home owner loan markets, there are finally some signs that recovery is on its way, as the number of applications for home owner loans and mortgages has seen a significant increase over recent months.

According to the latest statistics from Countrywide Estate agents and mortgage loan brokers, the number of new loan applications has risen by 43 per cent from the same period twelve months ago, although 100 per cent of practically nothing is still a very small amount.

Countrywide have seen a dramatic increase in loan applications, particularly over the course of the past three months and this has been attributed largely to an improvement in lending conditions, as banks and building societies have regained sources of wholesale funding, which has allowed them to increase competition between themselves and reduce interest rates for borrowers, as well as being able to increase the maximum level of loan to value available to borrowers.

This is finally having the effect of opening the door to home ownership for many would be buyers who were previously priced out of the market. Countrywide say that they have experienced an 8 per cent increase in loan applications for house purchase in November alone and even an increase of 5 per cent in applications for remortgage loans.

Grenville Turner of Countrywide said “ Competitive pricing from Lenders is making a huge difference to the market with interest rates now much closer to current standard variable rates, which may further boost both purchase and remortgage markets. Mortgage applications are increasing as lenders are no doubt vying for business in the run up to the year end, which is great news for new and existing mortgage customers who will benefit from reduced repayments.”