Over the course of the past few months, there have been many new loan products introduced to the home owner loan market by banks and building societies, which have been aimed particularly at the first time buyer market.

Although this is a positive move and lenders are being seen to offer new loans to this sector of the housing market, the reality of the situation is that many potential first time buyers are still being excluded from getting the loan they require due to over strict underwriting criteria.

The news comes from reports from financial advisers and loan brokers, who have experienced unachievable credit scoring levels and onerous sales processes for their clients, which has ultimately led to them not being accepted for the home owner loan they initially thought they were eligible for.

A number of home owner loan and mortgage brokers have highlighted Abbey as a particularly bad example of excessive scrutiny of first time buyers. Examples of reasons why loans were rejected include things such as: the applicant’s payslips were laid out in the wrong format for the lender and that the proof of deposit for a loan applicant had been rejected due to the fact that it had come from an inheritance, rather than having been saved up over a period of time by the potential borrower.

Abbey have defended their underwriting process for first time buyer loans, claiming that they are one of the few lenders who still offer loans to this sector of the market. However, they do acknowledge that it is still likely to be more difficult for a first time buyer to obtain a loan in the current economic conditions, due to the fact that they do not have a previous track record of maintaining repayments on a home owner loan, thereby making them a higher risk borrower.

Although we have seen a steady increase in the number of available home owner loan and mortgage products over the course of recent months, the vast majority of these have been aimed at the mainstream loan market, with a clean credit history and a low loan to value ratio.

But one specialist loan company, Aldermore has announced that it is to launch a range of new home owner loan products, which have been specifically designed to offer help to those potential borrowers who have been rejected for the loan they require by a more traditional lender.

The new loan products will be launched during the second quarter of this year and will be aimed at those people who have previously failed a credit score on a loan application, or who require a higher loan to value ration than many traditional lenders are prepared to offer.

Aldermore’s products will be available either directly, or via a loan broker or financial intermediary and will focus on areas that would cause a borrower to fail a standard automated credit scoring system, such as a recent house move or job change, or previous problems such as loan arrears which have now been cleared up.

Colin Snowdon of Aldermore said “Thousands of perfectly credit worthy borrowers are being denied access to the mortgage market by lenders who rely on credit scoring and refuse to consider cases which fall outside the norm. Take, for example, an application from a self employed person with income being generated via multiple sources. If the income can be proven or verified by an accountant, that’s fine with us.”

As well as residential loans, Aldermore also plan to launch a similar buy to let loan product and details of all their new products will be announced shortly.

The Payment Protection Insurance (PPI) industry has come under extreme scrutiny and pressure over the course of the past couple of years or so, as the number of complaints made against these policies has increased dramatically, with the majority of these cases being upheld by the Financial Ombudsman Service (FOS).

A large number of people have been sold a PPI policy at the same time as they have taken out a personal loan, home owner loan or credit card and in many cases have only found that they were not actually covered, or eligible for cover, until they came to make a claim, by which time it is too late.

The Financial Services Authority (FSA)has investigated the sale of PPI policies alongside loans and has already introduced new regulation in order to stop the mis-selling of these plans in the future. However, the FSA has also ordered that compensation must be paid to those loan customers who have complained about their policy.

Research from the financial research firm Defaqto, has suggested that the compensation bill for PPI companies is likely to be between £700 million and £1.2 billion, just for those individuals who have already complained. However, Defaqto also believe that the total potential claim against PPI companies could eventually run to around £3 billion.

The big worry is of course, that PPI providers, such as banks and loan companies, are likely to try and recoup these losses form customers in some other form. One of the most likely methods of getting their money back will be to increase the rate of interest charged on personal loans, home owner loans and credit cards.

Ben Heffer of Defaqto said “Given the scale of potential compensation amounts there is certain to be a lot of legal argument. If lenders are forced to pay compensation on the scale envisaged they will have to recover it from other sources and these could include a further widening of interest rate margins on loans and provide a further impetus towards the end of free banking.”

Just a few years ago, there was a rush of people with a bit of spare cash taking advantage of the growing property market and taking out large buy to let loans in order to purchase property, in the belief that they couldn’t possible lose out on their investment.

But the effects of the credit crunch and economic slow down have taken their toll on many landlords who took out large loans in order to buy their properties and many are now facing serious debt problems caused by the arrears they have built up on their loans, according to figures from the debt advice website IVA.com.

Although the latest figures from the Council of Mortgage Lenders (CML) show that the level of loan arrears and repossessions on buy to let properties have fallen by around 37 per cent and 25 per cent respectively over the course of the last year, the figures from IVA.com have revealed an increase of 53 per cent in arrears on buy to let loans, as landlords struggle to maintain their loan repayments.

Many of those in difficulty with their loans are middle class professional people, many of whom have bought property as a sideline investment to their main occupation and the typical level of loan debt is reported to be between £160,000 and £200,000.

Terry Balfour of IVA.com said “We have seen a near melt down in the buy to let market, with a combination of rental arrears caused mainly by tenants losing their jobs, void periods and high fixed rate mortgages causing serious problems.”

“While it is encouraging to see that the total number of buy to let repossessions remain a relatively small proportion of the market, our experience is that when landlords do get into trouble, the debt levels become very unmanageable. Our biggest cases are Solicitors, which just goes to show that even the professionals can get it seriously wrong.”

A large number of people believe that if they do not take out loans or credit cards, then this will improve their credit score when it comes to the time when they need to borrow money on a home owner loan or mortgage.

But a recent survey from one home owner loan provider has shown that somewhere in the region of 10 million people could actually fail an automated credit score on a loan application, due to the fact that they have never had any previous credit, such as a personal loan or credit card, or that they are not registered on the electoral role.

The survey, which was conducted by Kensington Mortgages, found that around 13 per cent of individuals had not taken out any new loan or credit agreements since before the year 2000 and that a further 9 per cent were not sure whether or not they were registered on the electoral role.

The fact that they do not have any record of loan repayment history showing on their credit file could actually have a detrimental effect on a person’s ability to obtain a new loan, as the majority of automated scoring systems use an individual’s track record in order to assess their ability to afford the new loan repayments.

This means that somewhere in the region of 20 per cent of the population could be rejected for a loan, if only an automated system is used, even though they have a clean record.

Charles Morley at Kensington said “The best buy rates on many prime deals are only available to the select few who meet a long list of rigid criteria and, as a result, many good borrowers are being prevented form getting a mortgage because their circumstances are slightly more complicated than can be accommodated by an automated credit score.”