The British Bankers’ Association has released its mortgage lending figures for December and they show that home loan approvals hit a 19-month high.

36,171 mortgages were approved in the final month of 2011, up from 34,809 the previous month. The figures would suggest that slightly more first time buyers entered the market place as the number of remortgages declined marginally in December.

Despite the upturn towards the end of the year, contractor mortgage approvals are still well down on the boom days and this was reflected in the number of completions last year. Only 890,000 house sales were completed, the lowest since 2009 and one of the lowest totals since records started to be kept in 1978.

Rising unemployment and a lack of available credit are to blame for the low housing market activity, according to many experts. People moving home and first time buyers have struggled to get credit and therefore we must expect low sales levels, Geoff Meen, an economics professor at the University of Reading explained.

The CML has already said it expects this year to be similar to last and suggests that there could be even fewer sales this year. The Building Society Association’s Adrian Coles shares that sentiment saying he does not expect to see pre-recession level sales in the near future. He explained that we have seen some fundamental changes that will prevent the market recovering in the next couple of years.

The FSA intends to ban mortgages that are higher than the value of the property next year. Many people think that lending more than a home was worth was a major contributory factor to the most recent recession.

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Yorkshire Building Society had some welcome news for first time buyers earlier this week when it cut the interest rate on its range of low deposit contractor mortgages.

First time buyers with a 10% deposit, and people moving home with only 10% equity in their current property, can now get a three-year fixed rate mortgage from the Yorkshire at 4.69%. Furthermore, the arrangement fee is only £495, making this a highly competitive 90% LTV deal.

Although this mortgage will no doubt appeal to first time buyers, it could also be of interest to those with little equity who want to upsize or remortgage.

Moneynet.co.uk’s Andrew Hagger said this is an attractive rate for people with only 10% to put down as a deposit. However, far more competitive rates are available for those with larger deposits. For example, the Building Society also offers an 85% LTV three-year fix at just 3.89%.

Another building society with a promising three-year fix is the Leek United. It’s 90% LTV three-year fix charges just 3.99%, but there is an arrangement fee of £995.

People who want to fix their monthly repayments for five years could find HSBC’s five-year deal to their liking. This is a 90% LTV mortgage at 4.89% and there is no arrangement fee to pay.

Concerns have been raised that people who opt for two or three year fixes will find their deal expires just as the Bank of England raises interest rates. Of course we have no idea when, and by how much, interest rates will start to increase, but people looking for long-term financial security may want to consider a longer-term fix.

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Recent research suggests that 20% of first time buyers were unable to find a suitable contractor mortgage in 2011.

The study from the UK Mortgage Council also discovered that more than one in four prospective first time buyers would only have enough money for a 5% deposit, while 28% believed they had enough savings for a 10% deposit.

CML data released towards the end of last year showed that first time buyer deposits averaged 20%.

RFi analyst Anna Spivack said that low deposit products are available from some building societies that offer 95% LTV mortgages to first time buyers. However, although there are products available, first time buyers without a large deposit are faced with a more challenging environment than those who bought in previous years simply because of the current turbulent economic climate.

The UKMC study found that 29% of first timers wanted a home loan of between £100,001 and £150,000, whilst slightly more than one in five wanted a mortgage between £50,001 and £100,000. Less than 5% had set their sights on a mortgage of between £250,001 and £300,000.

Spivack went on to say that these figures are reasonable considering current UK house prices, but they do explain why the majority of first time buyers expect to get a mortgage of at least 90% LTV. Nearly 60% of prospective first purchasers earn a maximum of £30,000 a year and trying to save £35,000 as a 20% deposit for a £175,000 home would be impossible for many of them.

How indicative the UKMC’s figures are on the real state of the first time buyer market in the UK could be in doubt as the group only surveyed 333 prospective property owners.

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There hasn’t been much good news to shout about in the housing market recently, but a glimmer of hope has crept in after the CML announced that mortgage lending increased in November.

The number of people taking out a fixed rate contractor mortgage in November was the highest seen for more than two years. 65% of the 47,000 mortgages taken out were fixed rate deals as borrowers took advantage of the good deals available. The Post Office and Nationwide are amongst the providers to have slashed the rates on their fixes as the Bank of England base rate remains at 0.5%.

Despite November’s increase, Howard Archer from HIS Global Insight explained that the UK’s housing market is still low and will probably come under further pressure this year. He expects house prices to fall by as much as 5% as the market is weighed down by rising unemployment, weakened economic activity and low consumer confidence.

First time buyers took out 17,300 mortgages worth a total of £2.1 billion in November. In November 2010, the typical first timer spent 13% of their income on mortgage interest payments. By November 2011, this had decreased to 12.2%.

The CML remarked that although we have seen a significant decrease in the number of first time buyers since the start of the recession, the proportion of mortgages granted to them has stayed reasonably steady. Last November, 37% of all mortgages went to first timers. There was also a 2% year on year increase in the number of mortgages granted to people moving home.

Paul Smee, the director general of the CML, expects to see first time buyer activity increase in the short term as purchasers rush to complete before the stamp duty holiday ends in March.

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People looking for a contractor mortgage may want to consider visiting HSBC after the bank announced it planned to make a minimum of £15 billion available to UK homeowners this year. £3 billion of this pot will be set aside specifically for first time buyers.

According to the CML, the UK mortgage market will shrink this year and HSBC’s commitment will give it a market share in excess of 11%. HSBC lent £6.7 billion in residential home loans in the first half of last year, an increase of 35% on the comparable period in 2010.

The majority of the £15 billion will be new funding coming into the mortgage market and will make HSBC the fifth largest mortgage lending institution in the UK. Around 150,000 homeowners, and more than 27,000 first time buyers will be able to get a mortgage from the bank this year.

HSBC’s head of lending, Martijn van der Heijden, explained that HSBC offered highly competitive mortgage rates last year and it intends to do more of the same in 2012. HSBC does not intend to close its doors to new customers, but it will continue to be a responsible lender.

He went on to say the £15 billion demonstrates the bank’s commitment to help people moving home and those looking to get a foot on the housing ladder.

HSBC refuses to work with brokers, preferring to deal with all mortgage customers direct. Despite this, David Hollingworth from London & Country applauded the bank for consistently stating its commitments publicly.

Other lenders will no doubt be watching HSBC’s strategy closely and this latest announcement could lead to similar announcements from other lending institutions.

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In the last 12 months, the number of available contractor mortgages has increased from 2,527 to 3,180. We’ve even seen some 95% LTV loans creeping into the market, but there are still not enough of them to satisfy first time buyer demand.

New mortgage deals are now only around for about 27 days before they become fully subscribed, according to the website Moneyfacts. The historic average was 30 days. This would suggest that demand is higher than supply.

Moneyfacts discovered that there are currently 49 mortgages requiring just 5% deposit. This compares favourably with the 24 products that were available this time last year. Furthermore, there are 280 home loans with people with a 10% deposit, up from 199 last January.

People moving home with a deposit of at least 40% have 393 mortgage products to choose from.

First time buyers have been having a hard time saving for a deposit over recent years and they will need to find more money this spring when the stamp duty holiday comes to an end.

Despite an increase in the number of products, there are concerns that mortgage lending criteria will be tightened this year and a lot of borrowers could struggle to meet the conditions. Current global economic concerns are weighing heavy on providers and they prefer the assurance that comes with a proven track record. This is reflected in the incentives, such as cash back and free legal fees, offered to those looking to remortgage.

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Although the Bank of England has held the base rate at a historic low of 0.5% for almost three years, contractor mortgage rates have been increasing recently as lenders fear a double dip recession.

A lack of trust in the Eurozone banking sector led to lenders increasing the cost of short-term fixes and tracker mortgages last month.

However, there are still some good deals available for buyers who shop around. First time buyers may be interested in the 95% LTV two-year fixed rate mortgage from the Newcastle Building Society. There is a £995 fee to pay, but you can get a fee-free version, with free valuation, at 6.25%.

People looking to remortgage might want to look into HSBC’s lifetime tracker mortgage. It’s pegged at 1.99% above the base rate and available to people with at least 35% deposit. There are no arrangement fees or early repayment charges and the mortgage comes with free legal work and valuation.

Home buyers looking for a little more security could be interested in a two-year fixed rate mortgage from the Hanley Economic Building Society. You need at least 15% deposit and an arrangement fee of £495 to get an interest rate of 3.34%. The Hanley also has an 85% LTV five-year fix at 4.40%. There is no arrangement fee to pay and remortgagers get a free valuation and free legal work while new purchasers receive £250 cashback.

First Direct has a two-year tracker at 1.49% above base for people with 35% deposit. It does attract a £1,499 fee but there is no charge for early repayments.

However, before you jump in and grab one of these products, do the maths and take into consideration all the fees and freebies to make sure you really are getting the best deal.

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According to a new study, first time buyers in Scotland pay a lower proportion of their earnings towards their contractor mortgage repayments than people in other parts of the UK.

In the final quarter of 2011, Scottish borrowers spent an average 20% of their income on their mortgage payments compared to 27% in the rest of the UK. Over the past 27 years, the average mortgage payment for first timers and those moving home was 30% of income.

The research from the Bank of Scotland showed that East Ayrshire was the most affordable UK local authority. A typical mortgage in the area would cost the buyer 15.7% of local average earnings. North Ayrshire and West Dunbartonshire followed close behind with 16.2%.

At the other end of the scale, a typical buyer in Edinburgh forks out an average 26.2% of local earnings on his or her mortgage payment.

However, Dr John Boyle from Rettie & Co said the housing market north of the border was still suffering. Affordability has been boosted by falling house prices and lower mortgage rates but high deposits and stricter mortgage lending criteria have made it harder for first time buyers to get a foot on the housing ladder.

Bank of Scotland housing economist, Nitesh Patel, explained that mortgage payments for new borrowers in Scotland now take up the lowest proportion of earnings for almost ten years. If, as is widely expected, the Bank of England keeps the base rate at its historic low throughout 2012, affordability should remain favourable this year.

Mortgage payments across the UK have nearly halved since 2007 when they accounted for 48% of income. Buyers in Greater London however still spend 35% of their income on their mortgage and those in the South East spend 33%.

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According to the Royal Institution of Chartered Surveyors, house sellers are becoming greedy and asking unrealistic prices.

The RICS said that the number of new instructions increased for the third consecutive month in December. The biggest increase in supply came from London, where new instructions rose to the highest level in nearly seven years. However, despite the number of new inquiries from buyers increasing slightly, expectations for future sales are flat due to unrealistic pricing from some vendors.

The latest RICS survey shows that house prices continued their downward trend albeit at a slower rate than in previous months. The only area to experience a rise in prices was London, whilst Humberside and Yorkshire and the West Midlands suffered the largest falls. 21% of the surveyors questioned expect house prices to fall further in the next three months.

Ian Perry, an RICS housing spokesman, said a lack of supply had been a major problem in some areas of the UK so it was pleasing to see more sellers entering the housing market in December. However, sellers must set a realistic price if they have any hope of selling their property within a reasonable timeframe.

The continuing turmoil in the Eurozone is likely to deter prospective buyers over the coming months and strict contractor mortgage lending criteria will prevent many prospective first time buyers obtaining the home loan they need.

Despite the economic gloom that heralded the end of 2011, sales activity managed to hold up reasonably well with average completions of 15.2 per surveyor for the final quarter of the year.

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Whilst first time buyers looking for a contractor mortgage have not yet fared quite as badly as the Dodo, in some parts of the UK they are increasingly becoming an endangered species.

According to a recent report, the East Midlands is one of the worst regions for first time buyers hoping to buy a home. Prospects for the next 12 months do not look good and the average UK earner would need to save for more than ten years to have enough money for a deposit. In the East Midlands, the average is 15 years.

A survey by InvestorBee discovered that a lot of first time buyers in the East Midlands don’t seem to grasp the reality of the situation. 27% of those who are saving for a deposit hope to buy a property this year, and 29% expect to be in their own home within two years. None of the survey’s respondents said they would save for longer than ten years in order to secure a deposit.

The average salary of a first time buyer in the East Midlands is £23,431. Even if they saved 9.3% of their income, it would take 15.6 years to save enough for a 20% deposit. House prices in the region currently average £169,411.

December’s first time buyer forecast from Rightmove suggested that only 18.4% of purchasers in the East Midlands this year will be first timers. The national average is 23% and puts the East Midlands in second last place. The South West has the lowest percentage of prospective first time buyers.

Rightmove’s survey also discovered that the average age for a first time buyer in England and Wales this year will be 32.

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Buy to let residential property investors are emerging as winners as the mortgage famine forces more and more people into renting rather than buying.

Savills estate agent has reported that private landlords now own nearly 20% of the UK’s housing stock.

Contractor mortgage lenders began tightening their lending criteria when the economic crisis began and although this has prevented a lot of first time buyers getting their first foot on the housing ladder, buy to let landlords have been able to take advantage of new opportunities. Investors are no longer lured by the promise of rising house prices; instead increasing rental income attracts them.

The CML says buy to let landlords received £3.8 billion in mortgage funding in the third quarter of 2011- a rise of 16%.

However, despite the tightened mortgage lending criteria, home loan approvals increased to 52,854 in November; up from 52,786 the month before. Of course, this figure is still well below the monthly average of 88,000 seen in 1993, but it is reassuring to see that the Eurozone crisis is not having as bad an impact as some might have expected.

The number of approved remortgages in November dropped from 34,004 to 31,154, the lowest amount since June 2011.

Samuel Tombs from Capital Economics pointed out that mortgage lending is going to be weighed down by the threat of a double-dip recession over the coming months. Mortgage approvals may start to fall again as banks increase the cost of lending in response to the deteriorating conditions in the wholesale funding markets.

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The Bank of England had some distressing news for contractor mortgage seekers last week when it said that it was about to get harder to obtain a home loan.

The BoE produces a quarterly mortgage lending activity survey and the latest one shows that lenders are expecting to tighten their credit scoring criteria in the coming months. Hardly surprisingly, lenders are concerned about the poor state of the UK economy and falling house prices.

The latest survey showed that lenders expect to approve a lesser proportion of mortgage loan applications and some lenders said they had revised their figures for calculating affordability. This strategy has already deterred a lot of potential purchasers from applying for a first time buyer mortgage.

Mortgage rationing has been in place since the onset of the global economic crisis in 2007. Lenders no longer had a ready supply of available funds for mortgages and house prices started to fall. Lenders also started to demand deposits of between 20% and 25%, which effectively put home ownership out of the reach of many first time buyers.

These factors have all contributed to the stagnant housing market we see today. And it now appears that worse is still to come.

The only good news to come out of the survey is that mortgage defaults are on the decrease and this trend is expected to continue over the next few months.

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