As people are slowly returning to the housing and home owner market, one of the biggest questions for new borrowers is whether they should take out a fixed rate loan whilst rates are cheap, or should they opt for a tracker rate loan, which I the cheap loan option at the moment, but could increase if interest rates rise.

Although most experts believe that the Bank of England base rate will remain at 0.5 per cent for the foreseeable future, giving us cheap loans for a while, rates could increase at any time in order to bring down the rate of inflation in the UK.

Whilst the choice of a fixed rate loan will give the borrower peace of mind that their loan repayments will not increase during he fixed period, this type of loan is likely to charge a premium for such a benefit, which could leave a borrower out of pocket if loan rates do not increase.

On the other hand, a tracker rate loan offers a good cheap loan option at the moment, but this will increase straight away if the base rate should increase.

As many fixed and tracker rate loan deals only run for two years before they revert to the standard variable rate, the argument as to whether a fixed or tracker deal is the best loan deal could be academic, as interest rates may not increase until the original deal has ended.

Long term deals on either fixed or tracker loan rates could be the best loan option, however, lenders are hedging their bets on base rates, with long term loan deals only accounting for around 2 per cent of the overall home owner loan market, whereas two year fixed rate loan deals now account for around30 per cent of the home owner loan market.

The amount of money being advanced on new home owner loans has increased dramatically over the month of March this year, as buyers have rushed to beat the deadline for the end of the stamp duty holiday, according to the latest figures from the Council of Mortgage Lenders (CML).

The latest figures from the trade body have shown that total gross lending for March this year stood at £13.4 billion worth on new loans, which shows a 17 per cent increase in loans from the same time last year, when the figure was just £11.4 billion.

The number and amount of new home owner loans being issued has steadily increased over the course of the first three months of this year, as first time buyers rushed to get on to the housing and home owner loan market and take advantage of the stamp duty holiday before it expired t the end of March.

The stamp duty holiday only applied to first time buyers who were purchasing a property for a value of up to £250,000, which means that thy could make a potential saving on tax of up to £2,500, which could then be put towards the cost of their deposit, home owner loan or other fees.

Bob Pannell of the CML said “The increase in our March lending estimate appears to be almost entirely due to stronger house purchase activity. The most likely explanation is that buyers wanted to complete their loans before the end of the stamp duty concession on 24th March.”

“However, we would be surprised if we did not see a drop in transactions over the next few months, following the end of the stamp duty concession, especially as it will take some while for NewBuy transaction levels to build.”

Following the recent mis selling scandal over Payment Protection Insurance (PPI) policies in connection with a personal loan, home owner loan or other form of credit agreement, the flood gates seem to have opened with consumers claiming on their PPI policy for a loan, whether it was mis sold or not.

Whilst many people are currently claiming against their original loan provider who sold them their PPI policy, many of these claimants do not realise how long they might have to wait before they get a refund on their contributions.

The Financial Ombudsman Service (FOS) who deal with all PPI complaints in connection with a loan or other credit agreement have been completely inundated with complaints from loan customers to the degree where consumers may have to wait for up to twelve months before they have their complaint resolved, or even looked at.

In order to combat this problem and improve the service, the FOS is currently recruiting extra staff, simply to deal with PPI complaints from loan customers.

At present, the FOS is taking on an additional 100 new staff every month, to try and tackle the backlog of PPI loan complaints alone and aim to have a total staff of around 2,500 by next year, compared with the 1,800 they started with.

The FOS is currently receiving around 1,000 complaints every day with regard to mis sold PPI alongside a personal loan or credit card, up from just 400 at the beginning of 2011.

Natalie Ceeney of the FOS said “We have seen the number of PPI complaints rise significantly over recent months to the extent where we are now receiving over 1,000 every working day. Our plans include significant expansion to our capacity so we can resolve 260,000 in the coming year.”

Following the proposals from the Financial Services Authority (FSA) the home owner loan and mortgage market is likely to become much tougher for many new and existing loan customers and borrowers in the new year, once the Mortgage Market Review (MMR) comes into force.

As a result of this, there has been a growing level of concern from the home owner loan industry, on behalf of those existing borrowers who will fall outside of the new, tighter lending criteria for loans and may not qualify for a new home owner loan, or a re- mortgage to obtain a more competitive cheap loan deal.

Existing borrowers who only have a limited amount of equity in their homes, or those who are currently paying an interest only loan without a repayment vehicle, may be excluded from taking a re-mortgage, due to affordability and loan to value issues, thereby remaining trapped in their current loan deal.

The FSA has acknowledged this problem and is now planning to introduce some transitional arrangements for this type of loan customer, which will allow them to take a similar loan on a new property, or re-mortgage their existing home, where the new loan would normally fall outside of the new lending criteria.

There are, however, some strict rules on this type of transitional loan. No additional borrowing will be allowed on the new loan, the borrower will not be able to take on higher monthly loan repayments and the term of the loan must not be extended from the original loan term.

Furthermore, this option will not be available to anyone who has previously been in loan arrears, or has missed loan repayments and the scheme can not be used to add or remove any parties to the existing loan.

Whilst this is a stepping stone in the right direction for interest only loan customers, in reality such transitional arrangements are unlikely to see the light of day from lenders allowing such loans, as the conditions of the loan would be too onerous on the lender to be able to enforce.

There are big financial changes for new students starting at university this September this year, with higher tuition fees of up to £9,000 per year from the majority of universities, pushing up the overall cost of gaining a degree, as well as the eventual amount of student loan which has to be repaid.

To add to the financial hardship of many students, it has been announced that the interest rate which is charged on student loans is set to increase to around 6.6 per cent in September, which is around the rates charged on many unsecured cheap loan deals and significantly more than many home owner loan deals at the moment.

The interest rate calculation for student loans is to be based on the Retail Price Index (RPI), with an additional rate of 3 per cent. As RPI currently stands at 3.6 per cent, this suggests that student loan rates are likely to be 6.6 per cent in September, although this has not yet been confirmed.

Currently the interest rate on student loans is around 1.5 per cent and this proposed hike in loan rates, on top of the additional amount which needs to be borrowed on a student loan to meet the extra tuition fees, is likely to impact severely on new students, making many of them think twice about continuing their education.

Martin Lewis of MoneySavingExpert said “One of my primary objections to the new system is that for the first time we are not just charging people for their education, but charging them for the financing of their loans too.”

“What’s more frustrating is many who don’t earn large after university will never actually pay this interest, with bigger fees combined with lower monthly loan repayments, they won’t clear their student loan debt before the 30 years when it wipes.”