Although we are starting to see a whole new range of home owner loan and mortgage products entering the market at the moment and new lending generally increasing on a month by month basis, we could suffer from a “rationing” of loan availability for years to come, according to the Council of Mortgage Lenders (CML).

The CML has warned that unless the new Government takes action to help banks and building societies to continue to be able to offer new home owner loans to borrowers through continued Treasury support, the demand for new loans is likely to far outstrip the supply of available funding.

The problem is that the previous Labour Government provided financial support to the banking industry or around £320 billion, in order for the industry to continue to be able to supply home owner loans and support the UK economy.

The £320 billion was offered as a loan to the banking industry under the special liquidity scheme and credit guarantee scheme as emergency financial support, but these loans will need to be repaid by 2012 and 2014.

Michael Coogan of the CML said that the new Government must do something to support the banking sector and in turn the home owner loan and mortgage markets. He also commented that many lenders were already under financial pressure from making repayments on government loans to bail them out and this was already leaving them short of funding to be made available for new home owner loans.

In the long term, lenders would like new funding for home owner loans to be made available through the private sector, but his is likely to be a long and slow transition and help from the Government and Treasury will be essential to ensure this runs smoothly.

Since the Bank of England Base Rate of interest feel to 0.5 per cent more than a year ago, one area of the home owner loan and mortgage market which has almost completely died off has been that of remortgaging, as borrowers have been better off remaining on their existing lender’s standard variable rate once their initial loan deal has expired.

The other factor against people switching their loan to a new provider has been due to a lack of equity in their homes. Many people took out loans for 85 or 90 per cent loan to value and with lenders reducing the maximum loan to value they are prepared to offer, many borrowers have not had the option to even consider switching their home owner loan.

But according to the latest figures from Unbiased.co.uk, there was an increase in remortgage activity during the month of April, as borrowers start to look at alternative providers for their home owner loan.

Although activity only increased by 1 per cent, it shows that there are now some realistic loan options for people looking to remortgage their home.

With many lenders increasing their standard variable rates and more affordable new deals coming onto the market which offer higher loan to values, a growing number of home owners are now thinking about the possibility of switching their loan.

Karen Barrett of Unbiased.co.uk said “While the housing market may still be a little uncertain due to the knock on effects of the general election, more affordable deals with higher loan to values have come onto the market place and it is clear this has prompted many prospective buyers to start investigating their mortgage options. As property prices are slowly starting to rise again, those looking to remortgage are also reassessing their current deal and appear to be on the look out for the right move.”

In recent months, it seems that inflation in the UK has been under control from the Bank of England, with levels remaining around the 2 per cent mark in line with government targets. However, the figures showed inflation hit a new 17 month high last month, according to the Office for National Statistics (ONS).

The latest figures show that the Consumer Price Index (CPI) reached a level of 3.7 per cent in April, well above government targets. This means that the Governor of the Bank of England, Mervyn King, will have to write to the new Chancellor, George Osbourne, for the first time to explain the reasons for the increase.

Of course, one way to control inflation is to increase interest rates and many people are now worried that this will be the case and the monthly cost of their home owner loan or mortgage may increase, particularly for those individuals with a variable or tracker loan.

The sudden increase in inflation has been put down to an increase in food prices, caused by the volcanic dust cloud, as well as an increase in duty on cigarettes and alcohol and higher clothing prices, although the ONS says that rising fuel prices have had less of an impact.

The retail prices index (RPI) which includes house price increases, stood at 5.3 per cent in April, up from 4.4 per cent the previous month.

The Bank of England have said that the are not overly concerned about this late rise in inflation as it should be fairly short lived and has been attributed to outside influences. They also said that it was unlikely that it would be necessary to increase interest rates at the present time, as this could cause problems for loan repayments, a welcome piece of news for those with variable rate home owner loans.

In many cases, when an individual is looking for a new personal loan, credit card or other form of new credit, they don’t look any further than their own bank and simply accept whatever loan rate they are offered, assuming that all loans cost the same amount.

But new research from Moneyfacts.co.uk has advised potential borrowers to shop around the market place before opting for the first loan product they are offered. Darren Cook of Moneyfacts has advised consumers that, not only could they save a large amount of money on their loan repayments over the term of the loan, but by getting themselves a cheap loan, they could possibly avoid landing themselves with unmanageable loan repayments, ending up with bad debts.

With the economic situation in the UK in a delicate position and banks and building societies still being reluctant to offer loans to anyone with anything other than a perfect credit rating, there is a huge difference in rates between different lenders and therefore it is more important than ever for borrowers to shop around for the best loan deal they can find.

Just because the Bank of England base rate of interest is at is lowest ever level, at just 0.5 per cent, it seems that many potential borrowers assume that personal loan rates will be at similarly low levels. However, this is simply not the case and in many cases loan rates have actually increased.

Although borrowers should still see what their bank has to offer, it is important that they compare alternative loan options, either by taking advice from a loan broker, or via the internet using one of the many price comparison websites.

Mr Cook said “Don’t take the first deal that is put on the table or the first deal that appears to be put on the table. We encourage you to shop around to make sure that you have a choice that is a fair pric that the market is offering.”

Despite the fact that the Bank of England base rate of interest for loans and savings has been at its lowest level in the history of the Bank of England for fourteen months now, at just 0.5 per cent, the cost of a new loan, whether this is an unsecured loan or a secured loan, has actually increased.

Whilst interest rates have fallen, the cost of a loan has increased dramatically over the course of the past couple of years, due to the effects of the credit crunch and banking crisis, causing banks and other lenders to lose their appetite for offering new loans at affordable prices.

But it now looks as though there is the possibility that cheap loans could be returning to the market, as one lender, Link Loans, has announced that it is to cut the interest rates on all its secured loan products with immediate effect.

The rate cuts will apply to secured loans with a loan to value of between 51 and 75 per cent and although these will vary depending on the actual loan to value ration offered, they could be up to 2.5 per cent cut on the rate.

Whilst this may not be everybody’s idea of a cheap loan and just be from one lender, the rate cuts are definitely a step in the right direction and shows that some competition is slowly returning to the secured loan market. Hopefully this move will prompt further rate cuts and other loan companies to follow suit with their own cost reductions.

Maeve Ward of Link loans said “The new rate reductions are proof that Link Loans listens to the market and adapts wherever possible to address any issues raised. Our aim is to be a major and long term lender in the secured loans market and this aim is backed by an extensive and fully supported funding resource.”