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.

© 2010 All rights reserved. Reproduction in whole or in part without permission is prohibited.

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.

© 2010 All rights reserved. Reproduction in whole or in part without permission is prohibited.

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.

© 2010 All rights reserved. Reproduction in whole or in part without permission is prohibited.

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.

© 2010 All rights reserved. Reproduction in whole or in part without permission is prohibited.

According to ARLA, an increasing number of householders are putting their homes up for rent because they are unable to sell them.

During the third quarter of last year, 47% of the surveyed ARLA member agents reported an increased number of unplanned lettings as homeowners turned to the private rental sector. At the beginning of 2011 the figure was 40%.

In the North East and North West, more than 60% of agents reported that more people were entering the rental sector because they were unable to sell their property. The same was true in Northern Ireland, Scotland and Wales. At the other end of the scale, only 17% of agents in London reported an increase in reluctant landlords.

Tim Hyatt, the president of ARLA, said letting a home might be a good way to generate a consistent income if prospective landlords adopt the right approach. But he warned that there are potential pitfalls for both side as the letting industry is unregulated.

Strict mortgage lending requirements, falling house prices and economic turmoil in the Eurozone have meant that people moving home for business purposes have been struggling to sell their property, and renting it out could be the only way they can afford to relocate. Reluctant landlords are most likely to bring detached and semi-detached houses onto the rental market, according to ARLA.

However, prospective landlords should contact their contractor mortgage provider and insurer before they rent out their property because the terms of their contract might need to be amended.

© 2010 All rights reserved. Reproduction in whole or in part without permission is prohibited.

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.

© 2010 All rights reserved. Reproduction in whole or in part without permission is prohibited.

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.

© 2010 All rights reserved. Reproduction in whole or in part without permission is prohibited.

People looking for a contractor mortgage may want to take advantage of the discounted fees being offered by some of the UK’s major mortgage lending institutions.

The Leeds Building Society now offers a three year 75% LTV fixed rate home loan at 3.04% and the booking fee is just £199.

HSBC is holding a New Year sale and has slashed fees on tracker mortgages. The bank is also offering trackers at 2.99% for people who can put down a 20% deposit.

Yorkshire and Clydesdale Bank have also chopped their fees to enable mortgage borrowers to save as much as £999 on a first time buyer home loan.

However, taking advantage of low fees is not always the best option. The Clydesdale/Yorkshire pair offer a two year 75% LTV fixed rate mortgage at 3.49% but despite Yorkshire Building Society charging a fee of £495, its 2.99% deal works out cheaper over the mortgage term.

Moneynet.co.uk’s Andrew Hagger points out that sales do not always offer the best value for money. However, HSBC’s offer is worth looking into because it cuts nearly £1,000 off its already market leading deals.

He went on to express his pleasure that the mortgage market is showing signs of activity so soon into the New Year, but warned consumers that a reduction in fees does not automatically make a mortgage a best buy. Consumers should always work out the full cost of the loan if they want to obtain the best deal.

© 2010 All rights reserved. Reproduction in whole or in part without permission is prohibited.

The housing market divide between the north and south of the UK is now at its widest point for more than ten years and it is expected to grow even further.

47% of the total value of all house sales in England and Wales can be attributed to the South East and London. In 2000, house prices in the South of England had seen five years of rapid growth leaving the North lagging behind.

However, Lucian Cook, one of the directors at Savills, says the current gap reflects the North’s reliance on public sector employment and its higher dependence on contractor mortgage funding.

Mortgage lending institutions are granting fewer home loans and only 46% of all housing transactions are mortgage funded. The primary source of funding has become equity due to the high deposit requirements laid down by lenders. Furthermore, whilst house prices in the north have been dropping, those in the south have continued to generate significant equity.

Mr Cook says the first quarter of 2008 was the turning point. Once the recession started to bite and the clampdown on mortgage lending started to constrain the market. The London housing market has continued to benefit from rich foreign investors but the recession had a significant impact on housing sales in all but the most expensive property brackets, he added.

Figures from the ONS suggest that average property prices have dropped by £9,000 since 2007 and the average home is now worth £195,000.

© 2010 All rights reserved. Reproduction in whole or in part without permission is prohibited.

Contractor mortgages may be even harder to find in 2012 as banks and building societies find themselves having to comply with stricter mortgage lending regulations.

Self-employed people and first time buyers will find it harder to obtain the finance to buy their first home and the over 50s could struggle to release equity already tied up in their property.

Under the FSA’s new regulations, borrowers must prove their income and satisfy the lender that they are able to repay the mortgage debt. Access to mortgages that will run past retirement date will also be restricted. This will mean the over 50s could have problems arranging an equity release scheme.

It will also be harder for first time buyers to get a high LTV home loan or an interest-only mortgage. They may want to consider a shared-equity arrangement, like the First Buy scheme backed by the government, or one from a property developer such as Barratt or Persimmon.

Saving regularly has to be a number one priority for prospective buyers. Nationwide offers a 95% LTV mortgage to buyers who have saved regularly for a minimum of six months.

Mortgage lenders are highly unlikely to lend money to anyone who is not on the electoral roll and they scrutinise credit reports so prospective borrowers should check theirs to make sure it does not contain incorrect information.

First time buyers have had a tough couple of years and unfortunately it looks like things are not set to improve this year.

© 2010 All rights reserved. Reproduction in whole or in part without permission is prohibited.

Although first time buyer homes are now at their most affordable since 2003, the number of people obtaining a contractor mortgage to buy one has dropped to an all time low, according to the Halifax.

A lot of properties in the North and the Midlands could be bought with a mortgage of between £80,000 and £95,000 – well within the reach of a young first time buyer, the UK’s biggest mortgage lending institution said.

The First Time Buyer Review for November discovered that houses bought by first timers were affordable in 44% of the UK’s local authorities. When the property market peaked in 2007, that figure was just 5%.

Despite this improved affordability, only 187,000 first time buyers came to the market in 2011, well down on the 568,200 in 2001. Whilst properties in the north may be within their price range, they are effectively locked out of the housing market in the south because of steep deposits and sky-high prices.

South Ayrshire is the most affordable area for a first time buyer, with average property prices standing at 2.65 times average gross annual earnings. The most affordable town in southern England is Peterborough, but at just 75 miles north of London, average house prices are four times average earnings.

At the other end of the scale, a property in the North London area of Brent would cost nine times the average local income. It’s not much easier to buy a home in Oxford, where typical prices are 7.75 times the average local income.

The buy to let market, on the other hand, enjoyed a boom year in 2011. Residential landlords took out nearly 90,000 mortgages on the first three quarters of last year compared to 68,000 in the first nine months of 2010.

There is a glimmer of hope for first time buyers as deposit requirements decreased to £27,032 last year. However, that is still more than the average gross annual salary for the majority of young adults and with landlords increasing rents, 64% of first time buyers had to rely on help from their relatives to raise a deposit in 2011.

© 2010 All rights reserved. Reproduction in whole or in part without permission is prohibited.

The Council of Mortgage Lenders is alarmed at the government’s proposals to alter the way SIM operates.

The Support for Mortgage Interest scheme was set up to help people who are in danger of losing their home because they have lost their job.

The minister for welfare reform, Lord Freud, is considering whether new SIM claimants should be entitled to indefinite financial help without the taxpayer having the opportunity to recover at least part of the costs. One of the proposals put forward is to set a time limit after which a charge will be put on the property of any claimant who still wants to receive SIM. The government would then recoup at least some of the benefit when the property is sold.

Lord Freud explained that the current benefit does not encourage people with a contractor mortgage to sort out their finances. It is also an unsustainable expense, costing the government £400 million every year.

There is currently no limit on the length of time homeowners receiving pension credit, income support or employment and support allowance are allowed to claim support for mortgage interest, but since the beginning of 2009 some people receiving jobseekers’ allowance have only been allowed to claim SMI for years.

The coalition is also In October last year, the government cut the rate at which SMI is paid and now it is thinking about extending the qualifying period from 13 weeks to 39 weeks, and cutting the mortgage limit to £100,000.

One major concern raised by the CML is over the proposal to pay SMI directly to the claimant rather than the mortgage lending institution. The government wants homeowners to be responsible for making their mortgage repayments but the CML believes that some claimants would spend the money on things other than their mortgage.

The chief executive of Shelter, Campbell Robb, said the proposal to reclaim SMI after a property has been sold was interesting but expressed concerns about the plan to extend the qualifying time to 39 weeks.

© 2010 All rights reserved. Reproduction in whole or in part without permission is prohibited.