Back in the good old days, prior to the credit crunch and banking crisis, it was possible for someone wanting to buy a house to obtain a home owner loan for 90 or even 95 per cent loan to value, in some cases even more.

However, following the credit crunch, these loan deals seemed to vanish overnight as lenders tightened their lending criteria and 75 per cent loan to value, or less, became the new maximum. Over the course of this year, there has been a slight increase in loan to values, as well as a slight reduction in interest rates from lenders, however over the past couple of months there has been a significant increase in the number of higher loan to value products becoming available on the market.

The news comes from the mortgage broker John Charcoal and shows positive signs of recovery in the home owner loan market, as banks and building societies start to increase levels of competition in the loan market once again.

Ray Boulger of John Charcoal said “Over the last month we have seen a continuation of the impact of a modest increase in competition from mortgage lenders and this has been particularly evident in the two year fixed rate market. However, what is more important for the health of the property market than modest  reductions in rates available for  borrowers only requiring a relatively low loan to value is the fact that there has been a significant increase in the number of mortgages available up to 80%,85% and even 90% loan to value.

Furthermore the additional competition in this sector of the market has pushed some rates and some arrangement fees lower. With lifetime trackers now available from bank base rate plus 2.08%, 2 year trackers from bank base plus 1.99% and a 5 year fix at 4.89%, all with arrangement fees under £1000 and the latter two deals available at 80% loan to value, borrowers now have access to the best rates for many months.”

At the beginning of this year, we saw the lowest level of activity in the housing and home owner loan market for several years, due to the effects of the credit crunch and banking crisis making people either extremely reluctant or unable to obtain the loan they required in order to be able to buy a house.

Since then, there has been a slow but steady increase in the number of loans being completed and by the end of October this year, there had been 55,000 new home owner loans completed for the month, which is the highest number of completions since December 2007.

The figures, which come from the Council of Mortgage Lenders (CML) have shown that the number of new loans for home purchase has more than doubled since January this year, when there were only 23,000 new loans issued.

There has been a continued decrease in the number of fixed rate loans and mortgages over this period, as a continuous period of low interest rates, and the prospect of future low rates for some considerable time to come yet, has encouraged many buyers to opt for a tracker rate loan. New loans for remortgage, however, are still at extremely low levels, with only 33,000 remortgage loans offered throughout October. In August this year, the number of remortgage loans reached its all time low of just 30,000, since records began in 2002.

Michael Coogan of the CML said “We are still in a two speed mortgage market. It appears that low interest rates for those with substantial deposits, coupled with this year’s sustained increases in house prices, are encouraging more people to buy or move home. But the same low interest rates that are driving house purchase activity provided little incentive for borrowers to refinance their loans. this, coupled with ongoing tightness in lending criteria, continues to hold back the remortgage market.”

2009 has been a particularly disappointing year for those individuals who have savings in a bank or building society account, or who save on a regular basis in these accounts.

Since the Bank of England lowered the base rate of interest in March this year, in order to help the housing and home owner loan markets, as well as those people struggling to keep up with the repayments on their existing loans and other debts, savings accounts rates have suffered greatly, with many falling to practically nothing and other, higher rate savings accounts being withdrawn from the market.

Even long term savings accounts, such as fixed rate bonds have been affected by the slump in interest rate and although there were some new products introduced over the course of the past few months, many of these have now been withdrawn, or replaced by products offering lower rates.

At the same time as this, the same banks who have lowered rates for savers have not done the same on their loan products for borrowers, with many personal loan rates, both on unsecured loans and secured loans either remaining the same, or even increasing over the course of the year.

There is little wonder then, that many people who have savings as well as loans are withdrawing their money from savings accounts and repaying their personal loan debts instead, as this makes much more financial sense than keeping large sums of money in a bank account for a negligible return.

As new funding is slowly becoming more available on the wholesale money markets, banks are not quite as dependant on the money from savers to  maintain their balance sheets and fund loans to borrowers and this is becoming apparent in the way financial institutions are failing to offer incentives to encourage people to save.

There have been many complaints from consumer groups in recent months, that despite the fact that the Bank of England base rate of interest for loans and mortgages has fallen to an all time low of 0.5 per cent, the majority of lenders have not reduced their rates accordingly, charging way above the base rate on home owner loans, particularly when it comes to fixed rate loan deals, which have remained stubbornly high, pushing borrowers towards discounted and tracker rate loans instead.

However it looks as though the situation is finally changing, as a number of major lenders have cut their fixed rate loan deal rates.

Research from Moneyfacts.com showed that the average rate on a fixed rate loans had eventually fallen to just below 5.00 per cent last week, but as banks and building societies continue to increase competition and introduce market leading rates, they have reduced further once again, with the average fixed rate loan deal now standing at just 4.86 per cent.

This is now starting to make fixed rate loans attractive to potential borrowers once again, as the margin between the base rate and the loan rate is slowly closing, although many borrowers are now likely to delay buying to see if rates will fall even further.

Michelle Slade at Moneyfacts.co.uk said “Lenders finally appear to be putting the “open for business” sign back in the window and bringing competition back to the mortgage market. Margins on fixed rate mortgage deals have steadily increased in the last year as lenders look to repair damaged balance sheets.

Following their peak in October 2009, mortgage margins on the popular two year fixed deals have fallen steadily, now standing at the lowest level since August 2009. The number of two year fixed deals paying below 4.00 per cent has increased from 53 to 94 in the last two months and now accounts for a quarter of all two year fixed deals on the market.”

With house prices falling over the past couple of years or so and banks and building societies making it particularly difficult to be accepted for a new home owner loan or mortgage, with much tighter lending criteria and lower loan to value ratio’s, many would be first time buyers have been either put off, or have been unable to afford to apply for a new home owner loan and have therefore been unable or unwilling to buy their first home in the current market conditions.

But there may be some more positive news for first time buyers, as the total number of home owner loans and mortgage products available to them has reached its highest point since May this year.

The news comes from research carried out by Moneysupermarket.com, who claim that there are currently 1,354 different home owner loan products available to first time buyers. This shows an increase of 18.3 per cent since August this year, when the number of loan deals was at its lowest point.

In addition to a wider range of loan products to choose from, many lenders are also now starting to increase the maximum loan to value they are prepared to allow, making it easier for first time buyers to get onto the property ladder, as they do not need to save quite as much of a deposit, or call on their parents for financial help, as is often the case.

Hannah Mercedes-Skenfield of moneysupermarket.com said “It is encouraging to see an increase in lenders providing suitable options for first time buyers, as the number of products in this arena have been low for some time. If lenders continue to give a helping hand to first time borrowers we could see a significant improvement in the housing market.”