January this year saw the lowest number of home owner loan and mortgage applications since 2002, although most experts believe that this is largely due to factors such as, the usual seasonal decline in loans, particularly bad weather and the rush by many home buyers to beat the end of the stamp duty holiday at the end of last year.

Despite this drop in loan applications, there were more home owner loan products on the market by the end of January this year, than at any tome in the previous twelve months, according to the latest figures from Moneyfacts.co.uk.

Although there were only 35,000 new home owner loan applications made throughout the month of January, the total number of available loan products from lenders increased to 2,019 and although this is still only a small fraction of the number of loan deals available a few years ago, there is now a wider choice for potential borrowers than they have had for the past twelve months.

What is even better news, particularly for first time buyers, is that many of the new deals being introduced by lenders are starting to relax their lending criteria slightly and offer higher loan to values ratios on their products. There are now a much higher proportion of loan deals which offer up to 90 per cent loan to value.

Darren Cook at Moneyfacts.co.uk said “There is an indication that competition within the mortgage market is getting stronger and more products are being made available to customers with small deposits, but these are still priced at a premium.”

“With product numbers on the increase, the question of quantity over quality arises. But this mortgage market dictates and history shows us that with quantity comes quality and open competition on interest rates.” 

This may seem like quite a strange statement to be making, but new research form Unbiased.co.uk has found that the average person living in the UK spends the first 50 days worth of salary on repaying their personal loans and other debts.

The consumer website, which helps to put individuals in touch with independent advisers for home owner loans and other financial matters, has declared that the 20th of February this year should be known as “Debt freedom day.”

Debt freedom day has been calculated as the point in the year when an average person with loans would have cleared all their debt commitment for the year, if they had used every penny of their salary to repay their loans from the beginning of the year. To put it another way, 13.7 per cent of an individual’s earnings are going towards repaying personal loans and other debts.

Despite the fact that many banks, building societies and other loan companies have been particularly reluctant to offer loans to anyone over the course of the last couple of years and also that many people in the UK are concentrating on repaying as much of their personal debt on loans and credit cards as they possibly can, the average debt level amongst individuals in the UK is still increasing, as individuals continue to take out new personal loans and use their credit cards to supplement their salaries.

The Consumer Credit Counselling Service (CCCS) has commented that this news shows just why individuals should not become complacent about their loans and other debts and should manage their debt repayment more actively.

Karen Barrett of Unbiased.co.uk commented on the figures, she said “Debts can quickly mount up to a considerable sum and this rate demonstrates that debt is something that we need to take control of and actively manage.”

The banking sector has come under a lot of criticism over the course of the past couple of years and many people blame the banks for the recent credit crunch and banking crisis, due to their past record of irresponsible lending and offering large loans to individuals who would have had very little chance of ever being able to afford to repay them.

A number of large high street banks have been partially privatised by huge loans from the Government in order to bail them out, yet despite this, many of them are still unable to offer competitive cheap loans to individuals and small businesses who need funding.

But recently, banks have started to declare large profits once again and although they may be unable to offer loans to those people who need them, many are able to pay large bonuses to many of their high ranking officials, which has caused a large amount of anger amongst the general public.

In an attempt to calm public feeling and to show some humility, the Chief Executive of the Royal Bank of Scotland (RBS), Stephen Hester, has announced that he intends to give up his bonus for last year, which is worth around £1.6 million.

This follows a move from bosses at Barclays Bank, who announced last week that they would give up their latest bonus payments. This now places pressure on other chief executives of banks to make a similar gesture in the interests of good will towards bank customers and the public.

70 per cent of RBS is currently owned by the government through loans granted in order to bail the bank out and although Mr Hester is giving up his £1.6 million bonus, his earnings will still be in excess of £8 million for the year.

We reported last week that the latest figures from the Council of Mortgage Lenders (CML) have revealed that the number of home owner loan applications had dropped in January by a staggering 32 per cent in just one month alone.

Whilst the amount of new loans had fallen to the lowest point in almost ten years in January, there was a significant increase in the number of new products which became available on the home owner loan and mortgage market.

The number of available home owner loan products actually increased by 402 over the course of the last month, with many of the new loan products offering relatively cheap rates or an increase in the maximum loan to value available to potential borrowers.

The number of home owner loan product which offer a maximum loan to value of 90 per cent has gone up to 157 by the end of January, up from 114 at the beginning of the year, an increase of 37.72 per cent.

Similarly the number of 85 per cent loan to value products has risen to 334, from a figure of just 260 at the start of the year. Some lenders are even starting to return to 95 per cent loan to value products, with two such loan products entering the market.

At the same time as an increase in the number of high loan to value products, the cost of many fixed and tracker rate loans has reduced for those individuals who only require a relatively low loan to value ratio.

Darren Cook at Moneyfacts.co.uk said “Mortgage lending is down and prospects for the future mortgage market looks uncertain, but we can positively say that mortgage rates are heading in the right direction. New mortgage rates are steadily reducing and there is a modest return of competition, buy an appetite to lend looks to continue to be missing from the equation at the moment.”

Towards the back end of last year, there was a significant increase in the amount of activity within the housing and home owner loan markets, with December hitting a particular high point with a large proportion of first time buyers entering the market.

The main reason for this boost in purchases and loan applications was largely due to the imminent end to the Government’s stamp duty holiday at the end of December and many home buyers, particularly first time buyers of properties valued below £175,000, were rushing to save themselves this additional cost on top of their home owner  loan or mortgage.

However, the latest figures from the Council of Mortgage Lenders (CML) have revealed many experts worst fears, which has been that the boost in sales and loan applications prior to Christmas has led to a dramatic fall in home owner loan applications during January.

According to the figures from the CML, the amount of new lending on home owner loans fell by 32 per cent in January alone, from December, to reach the lowest level of activity since February 2000.

The gross amount of new home owner loans in December was £13.4 billion, but this had fallen to just £9.1 billion by the end of January.

Although this shows a significant drop in new loan activity, this has been largely due to the stamp duty holiday rush and the usual seasonal decrease in loan activity and many experts have been expecting these figures and do not see reason for undue concern.

Paul Samter at the CML said “We remain in a period of uncertainty for the housing market and economy at large. The market certainly improved over the second half of last year and started 2010 in better shape than most would have predicted twelve months ago.”