Over the course of the past couple of months, many banks and building societies have been starting to offer home owner loan products with much higher maximum loan to value ratios than were available throughout most of last year.

According to the latest figures from Countrywide Estate Agents and mortgage brokers, a new range of products offering up to 90 per cent loan to value has attracted a large number of first time buyers into the housing and home owner loan markets, many of whom could not previously afford to raise the necessary deposit to meet lenders stringent loan to value criteria.

The figures from Countrywide have revealed that the top ten selling loan products throughout January were all aimed at first time buyers and four of these loan deals offered up to 90 per cent loan to value.

Due to the stamp duty holiday ending in December last year, many expected the number of loan applications, particularly for first time buyers, to fall in the early months of 2010, but according to the figures, home owner applications actually increased in January by 14 per cent above the figure for the previous month.

Grenville Turner of Countrywide said “Activity in the market is on the up with our estate agency division reporting a 32 per cent increase in new buyer enquiries. Lenders are also moving in the right direction and our broker network has noted that there are now 85 per cent more mortgage products available compared to the same period last year.”

“While the overall interest rate of Countrywide’s top ten mortgage applications has increased, this is attributed to the strong return of high loan to value products with 90 per cent loan to values pushing up the average interest rate, as the best deals are reserved for those with bigger deposits.”

The Bank of England Base rate of interest for loans and savings has now remained at a historically low level for almost one year.

With the base rate still at just 0.5 per cent, those people who have chosen a variable or tracker rate for their home owner loan, or other personal loan, have seen their monthly repayment amounts fall significantly, in many cases helping them through the difficult times of the past twelve months.

But in December last year, the rate of inflation rose dramatically to reach 2.9 per cent (0.9 per cent above the Government target), thereby leading to fears that this could cause the Monetary Policy Committee (MPC) to increase interest rates to compensate for this rise.

But one economist has warned that increasing interest rates will have little effect on the rate of inflation and could actually be detrimental to those individuals with a variable rate loan, or for those looking for a new loan, with the possibility of pushing the UK back into recession just when we are starting to see some signs of recovery.

Charles Davis of the Centre for Economics and Business research (CEBR) commented that the recent increase in the Consumer Prices Index (CPI) was only a short term phenomenon which has been caused by factors such as the recent increase in the rate of VAT and the Bank of England should not take panic action against the increase.

Mr Davis thought that it was possible for the rate of inflation to increase above three per cent, although this should not be a cause for concern in the present circumstances. He said “That will cause Bank of England Governor Mervyn King to have to write to the Chancellor, but we really feel that this is a short term phenomenon.”

Many borrowers in the UK will be hoping for continued low interest rates, as an increase in the cost of their home owner loan could cause financial difficulties for many.

The effects of the credit crunch and recession have caused huge problems for many individuals with personal loan and credit card debt over the course of the past couple of years or so. But despite the fact that the UK economy is starting to show signs of recovery, the number of people becoming insolvent through their loan and card debts has continued to increase.

The Government has just released the latest figures from the Insolvency service for the last three months of last year and the statistics have revealed that the level of personal insolvency through bad personal loan and credit card debt has continued to increase now for eight consecutive months and has reached its highest level ever recorded.

Over the course of last year, there were 134,142 individuals in the UK who were declared insolvent and the predictions are for these figures to continue increasing throughout the coming twelve months.

In the three months run up to the end of last year alone, there were 17,007 people declared bankrupt, 13,219 people entered into an Individual Voluntary Arrangement (IVA) and 5,348 Debt Relief Orders (DRO’s) were imposed on individuals. With a total of 35,574 individuals facing severe difficulties with their loan and credit card debts, this is an increase of nearly a quarter above the figures for the same time twelve months previously.

One insolvency expert, Pat Boyden commented on the alarming figures, “The huge numbers of people entering insolvency demonstrates the real effect the recession is having on the average person in the UK. However, the one chink of light in this worrying story is that more of those people entering insolvency are entering into IVA’s as opposed to straight bankruptcy, meaning they are seeking ways of settling their debts.”

Over the course of the past couple of years or so, since the start of the credit crunch, consumer confidence in the housing and home owner loan markets has dropped to the lowest level for many years.

But confidence levels amongst potential home buyers and people looking for a home owner loan or mortgage is slowly starting to increase, according to new research published by Unbiased.co.uk.

The survey found that around 18 per cent of potential buyers believed that house prices had now reached their lowest point and a further 29 per cent thought that prices were now actually starting to increase. However, almost one third of first time buyers are still trying to save up a large enough deposit to meet lenders stricter criteria on the maximum loan to value they are prepared to offer.

With a growing number of potential home buyers believing that house prices are as cheap as they are ever likely to be and the monthly cost of a home owner loan or mortgage at low levels due to the record low level of interest rates on loans, many people are in the belief that now is the best time to apply for a loan and enter the property market.

Karen Barrett of Unbiased.co.uk said “The last year has seen a real shift in the attitudes of consumers towards buying a house. No longer are potential home buyers biding their time until house prices have fallen. They are now looking to buy and gathering the means to do so.”

“With interest rates holding at an all time low consumers are seeing the importance of getting the right mortgage now more than ever. Those buying a new property, but also those looking to remortgage, will benefit from seeking professional advice on the whole of the market to get the best mortgage deal for their circumstances.”

In the early months of last year, when interest rates were falling at a significant rate and eventually reached their record low level of just 0.5% per cent, a large number of people believed that this low interest rate on loans would be short lived and as a result of this, around 80 per cent of all home owner loans and mortgages were taken out on a fixed rate basis, allowing borrowers to lock into a cheap loan rate before prices increased.

But almost one year later, the base rate of interest has remained at the same low level and due to the high premiums placed on many fixed rate loan deals by lenders, this type of home owner loan now seems like an expensive option.

It is therefore of little surprise that the latest home owner loan survey from Legal & General has revealed that there has been a sharp move from borrowers taking out a fixed rate loan and moving towards tracker deals, offering significantly lower rates.

The survey found that there has been a shift away from fixed rate loans on both residential home owner loans and buy to let loans, with 43 per cent of all residential loans and 57 per cent of all buy to let loans being taken on a tracker basis during the last three months of last year.

Stephen Smith of Legal & General said “There has been a distinct shift towards tracker rates, most likely because fixed rates are looking relatively expensive and because fears of imminent base rate rises are receding.”

“Most commentators are still expecting the base rate to stay low for some time to come, so this is a golden opportunity for people to think about paying off some of their loan debt. The low interest rate environment has led to a fair bit of innovation in tracker products, what with capped trackers, reverse stepped trackers and lifetime trackers all featuring recently.”