Due to the effects of the credit crunch and recent recession and problems within the home owner loan and mortgage markets, a growing number of home owners in the UK have been finding it increasingly difficult to keep up with their loan repayments.

This has led to an increase in the numbers and level of home owner loan arrears, as well as a dramatic increase in the number of loan defaults and repossessions.

Although the government, the Financial Services Authority (FSA) and lenders introduced various measures and schemes in order to protect borrowers who were suffering problems with their loans, there are still many people who are still on the financial edge and facing growing loan arrears.

But now, new regulations are to be introduced which will offer borrowers an additional layer of protection when and if they are unable to manage their home owner loan repayments.

The FSA has used its rules under its “treating customers fairly” principles to ensure that banks and building societies, as well as other loan companies, do not take advantage of borrowers who may be in arrears with their loan.

The new rules state that lenders are unable to charge penalty fees on loan arrears where the borrower has already made arrangements with the lender to resolve the problem. And that any additional payments made by the borrower, must be allocated to the loan arrears first and not any charges which may have been incurred.

In addition to this, where repossession does take place, the lender must be able to demonstrate that this was an absolute last resort and that all other methods to save the loan had already been tried.

Lenders are now also required to record all loan arrears telephone calls and keep a record of these for at least three years.

Anyone who has held a mortgage or home owner loan for the past few years will have undoubtedly seen their monthly loan repayments reduce significantly over the course of the last couple of years.

Despite other bills and utility costs increasing over this period, a new survey has found that the average cost of owning and running a home has fallen by around 6 per cent in the last two years.

The research, which was conducted by the Halifax, has shown that the average cost of running a home in the UK fell from £9,564 in April 2008, to £9,020 in April this year, a reduction of £544 per annum. By the time inflationary factors have been taken into account, this equates to a total reduction in costs of around 9 per cent in real terms.

The biggest saving in housing costs has been due to the reduction in the monthly cost of a home owner loan or mortgage, the rates on which have fallen by an average of 2.13 per cent over the period. This has given a saving of around 19 per cent on home owner loan repayments, averaging out at £881 on a typical loan.

Whilst the cost of a home owner loan has fallen significantly over the past two years, this has been partially compensated for by an increase in other household bills, such as utilities and food, although these coast increases are well below the current level of inflation in the UK.

Suren Thiru of the Halifax said “Over the last two years, the cost associated with owning and running a home in the UK has fallen, entirely as a consequence of reduced mortgage payments. The drop in housing costs has helped to ease the strain on household’s finances, providing some relief to homeowners during the economic downturn.”

Pawn brokers, doorstep loan companies and pay day loan companies have come under a lot of criticism over recent months for the high level of interest they charge customers on small, short term loans and the additional spiralling loan debt problems they could potentially cause for borrowers who use them.

Due to the high cost and bad reputation which has become associated with doorstep lenders and pay day loan companies, in an industry which currently has very little regulation, the Office of Fair Trading (OFT) has conducted an investigation into this type of loan.

The OFT has just published its report on pay day loans and doorstep loans, which was considering whether there should be rules on what rate of interest lenders could charge on pay day loans, which would effectively place a maximum limit on the rate of interest such a loan company would be able to charge its customers.

However, the report concluded that there was no need at the present time to place a price cap on doorstep and pay day loans, as they provide a good service to those who are unable to obtain a personal loan through a more traditional route.

The OFT also found that, in many cases, these loan companies have a very low level of customer complaints and that several of them do not levy additional charges on loan arrears of missed payments, unlike the majority of unsecured loans through a high street bank.

Ohad Hessel at Paydaybank.co.uk said “There are no calls for regulation of car insurance companies who inflict high insurance premiums on drivers under 25 because they are a greater risk to insure, which is the equivalent of what lending to higher credit risk individuals with a pay day loan equates to in the loan industry, the risk of default is higher.”

“Payday loans are a matter of consumer choice and as complaints remain minimal, we do not see any need for regulation.”

The average cost of a new home owner loan is currently standing at the lowest level it has been in the past seven years, according to new research and it could well get cheaper still.

The research from Moneyfacts.co.uk has revealed that the average two year fixed rate loan rate is currently 4.52 per cent. The last time that loan rates were cheaper than this was back in September 2003, when the average rate stood at just 4.51 per cent.

As the majority of borrowers on a standard variable rate loan deal with their existing lender are currently enjoying having a particularly cheap loan at the moment, due to the low Bank of England base rate, banks and building societies are having to take action to entice people to switch their loan to a new provider.

The best way to achieve this, is for lenders to lower interest rates on their new home owner loan deals and with the possibility of interest rate rises on the horizon, a fixed rate loan deal is also an added incentive for borrowers to move away from their existing loan deal.

Michelle Slade of Moneyfacts.co.uk commented on the rate reductions, she said “Lenders are trying to incentivise borrowers onto new fixed rate deals by making significant cuts to rates. A fifth of lenders have moved to increase their standard variable rate since the bank rate was kept on hold after finding their previous level unsustainable.”

“Competition for a limited amount of mortgage business continues to increase amongst lenders, who are once again actively competing to be top of the best buy tables.”

“The platform has been set for the mortgage market to return to some sort of normality, whilst still applying the lessons learnt over the last few years.”

Individuals living in the UK are continuing to use their spare disposable income to repay their outstanding unsecured loan and credit card debts, rather than save, according to a new survey.

The latest figures have been published by the British Banking Association (BBA) and show a continuing trend in people focussing on loan and debt repayment, instead of putting their money into a savings or deposit account with a bank.

The main reason for this is due to the particularly high interest rates which are charged on many unsecured loans and credit cards, compared with the negligible rate of interest which is currently being offered to savers on any deposit account.

With inflation running at a level much higher than government targets at the moment, and savings interest rates standing at a little above nothing, those people with money in a deposit account are, in many cases, seeing their savings being eroded due to inflation.

The figures from the BBA showed that the number and amount of new unsecured loans was actually less than the total amount which was repaid on outstanding personal loan balances throughout the month of May this year.

The BBA also say that although there is still a steady and constant demand for new unsecured loans, the figures for new loans are down on the same time last year by around 13 per cent.

Although the figures from retail sales on the high street show that people are still spending money, the number of new sales on credit and store cards also fell during the month of May, showing that people are being more careful about managing their debts.

David Dooks of the BBA commented on the figures, he said “The low interest environment is resulting in customers choosing to reduce or pay off borrowing, particularly personal loans, rather than saving.”