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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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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Earlier this month the RICS reported that the housing market improved in November. In fact, it was really more that the decline had slowed rather than the market picking up, but the news was greeted as more positive than any thing else to do with the current economy.

Only 17% of surveyors now expect house prices to fall further compared to 24% who expressed that sentiment in October. 7% of surveyors reported that enquiries increased in November and 14% said sales increased.

Another report, this time from the Council of Mortgage Lenders, shows that deposits for first time buyers remain at an average of 20%, but their contractor mortgage repayments have been falling and now consume 12.3% of take home pay. People moving home have also found mortgages more affordable and now only spend 9.2% of their income on their mortgage interest repayments.

There is no doubt that the housing market is becoming more affordable and yet the number of mortgages granted in October was down on the previous month.

Will next year be any better? The continuing problems in the Eurozone could mean we’re going to be in for a tough year. Standard and Chartered recently reduced their economic growth forecast for 2012 from 1.3% to -0.6%. This could be good news for first time buyers as house prices would probably fall further. Even if house prices remain as they are, they will become slightly more affordable as salaries are increasing by an average 2% and CPI inflation has dropped below 5%.

But, whatever the result of the Eurozone crisis, the housing market still has a long way to go before it’s out of the woods completely.

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The Financial Services Authority is believed to be thinking about loosening mortgage lending restrictions to help free contractor mortgage prisoners.

Data from the Council of Mortgage Lenders suggests that around 827,000 homeowners are trapped in negative equity, preventing them from moving home. The new rules would allow people in negative equity to buy another property with a remortgage without immediately settling their current debt.

This facility would only be made available to customers who have kept their mortgage repayments up to date. Those who have had problems would probably face stricter tests. Paul Broadhead, the Building Societies Association’s head of mortgage policy, said he hoped the FSA would take a wide range of borrower circumstances into consideration when it reached its decision.

He went on to say that his Association had been lobbying for an easing of limits on LTV ratios for some time as these can affect a lot of borrowers, not only those with negative equity.

The new guidelines will send mortgage lenders a strong signal that the FSA wants them to start approving mortgages and kick-start the housing market following the financial crash.

Before the credit crunch of 2007, 125% mortgages were readily available from mortgage lending institutions such as Northern Rock. Low-income households could borrow as much as seven times their income on an interest only deal, putting themselves at risk if house prices dropped. Furthermore, there was an increase in self-certification where borrowers did not need to prove their earnings.

The proposals, which will be outlined later today, are designed to stop dangerous lending and will probably include a ban on self-certification and a crackdown on interest-only mortgages.

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Despite the continuing economic turmoil in the Eurozone, people in the UK are reasonably confident that house prices are not going to fall next year.

Rightmove surveyed 25,000 people who are thinking about buying a property next year and discovered that 70% were optimistic about the outlook for house prices. Of the 30% who expected them to fall, two-thirds attribute it to a lack of confidence in the economy.

Rightmove director, Miles Shipside, said contractor mortgage seekers seems to have faith in the adage of ‘as safe as houses’ when it comes to property assets even though the economic situation continues to deteriorate.

41% of the survey’s respondents expect prices in their area to remain about the same for the next 12 months – up five percentage points on this time last year. In the same survey last year, 27% expected prices to increase, but this has now dropped to 20%, indicating a slight drop in confidence in some areas of the UK.

However, Shipside did point out that we will need to see economic stability throughout Europe before a lot of people are prepared to re-engage with the housing market.

People moving home in London demonstrated the most optimism about house prices with 29% expecting them to increase in the next 12 months. Wales, on the other hand, was most pessimistic with more than one in three expecting prices will be lower this time next year.

As always there are regional disparities depending on the mix and wealth demographics within an area. For example 26% of those surveyed in Preston expect to see higher house prices by December next year and yet in Lancaster, which is just 20 miles away, the percentage is only 14%.

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David Miles, a member of the Bank of England’s Monetary Policy Committee, believes that fewer owner-occupiers would encourage labour mobility. The Treasury, on the other hand, wants more people to get a contractor mortgage and buy their own property.

24 hours after the government announced measures to help first term buyers, David Miles said it would not be a bad thing for the level of owner occupation to decrease in the UK. He says that in the long-term, this would create a more stable economy and the Bank of England would find it easier to calibrate its interest rate policy.

The government appears to be underpinning house prices in the belief that the economy will benefit from rising asset prices. However, there are winners and losers in every game and the losers in this instance are the younger generation, many of whom have little to no chance of ever getting their foot on the housing ladder.

Over the past 40 years, we’ve had three housing booms and they’ve all preceded a painful bust. The UK economy has not improved during that time, growth is slower, manufacturing has shrivelled and we have a ballooning trade gap.

At some point in the future, the housing market has to stabilise. The government is encouraging residential builders to construct more affordable housing. David Cameron is also making it easier for first time buyers to get a 95% LTV mortgage. If more people come into the marketplace, potential second-time buyers will be able to start thinking about moving home and the cycle will be revived.

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We hear a lot about the problems facing first time buyers, but spare a thought for those who bought their property at the height of the housing market boom.

HSBC recently revealed that people who purchased their first home in 2007 have since seen the value of the property decrease by an average of £11,000.

More than 350,000 people are now believed to be trapped in their property because of falling house prices. Some unlucky buyers now find themselves in negative equity as the home is worth less than the value of their contractor mortgage. Others cannot move to a larger property because of the high costs associated with moving home.

People who bought their first home in Northern Ireland in 2007 have been worst hit. Their homes have reduced in value by a massive 42%, leaving them with an average negative equity of £45,000. In fact, the only UK region that has seen a rise in the value of first timer properties since 2007 is London and that increase is only 1.7%.

House prices continued their downward slide in September, decreasing 0.7% on the previous month.

Despite lower house prices, few first time buyers are benefitting. There are some very attractive mortgage rates about but mortgage lending institutions are still demanding large deposits, putting home ownership just out of reach.

At the same time, rental costs are soaring as demand outstrips supply, and prospective first time buyers find themselves dipping into their deposit savings to cope with the rising cost of living.

Howard Archer from HIS Global Insight predicts that house prices will have dropped by 5% by the middle of next summer due to the weak economy and low consumer confidence.

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Although money is in short supply at the moment, many Brits do not think about checking contractor mortgage rates to ensure they are getting the best deal.

Barclays recently conducted research and discovered that the only time 58% of homeowners change their mortgage is when they are moving home. And that’s despite them cutting back significantly in other areas in order to save money.

About 92% of the survey’s respondents said they were reducing their monthly outgoings and nearly three quarters said they would think about a remortgage if they could save at least £50 a month. However, the majority thought they would only gain about £10 a month by remortgaging.

Andy Gray, Barclays’ head of mortgages, said the survey results indicate that homeowners don’t realise that they can save money by remortgaging. Monthly outgoings are on the rise and a lot of British households are struggling to make ends meet. They would be well advised to consider their mortgage as part of any cost cutting exercise.

76% of respondents claim to spend at least three hours every month trying to make ends meet and 44% said they now devote more time to this than they have done in the past.

Barclays’ study has proved that a lot of people could save about £50 every month if they remortgage. Over the next two years, if everybody remortgaged, the UK could save £346 million.

It seems the message has got through to some homeowners. Data from the CML has revealed that remortgage activity in August was up 30% on the corresponding month last year. 34,100 remortgages were taken out during the month, worth about £4.2 billion.

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Nearly 200,000 mortgage holders will see their current fixed rate deal come to an end in the next six months. At least 80% of them will have been paying interest at 4% or more for the term of the fix.

Currently, fixed rate contractor mortgage rates are at an all time low. Northern Rock, for example, has a range of two-year fixes at less than 4%.

Borrowers with a fix that ends in January 2012 could have been paying around 4.68% in interest. If they have built up 30% equity, it could be worth considering switching to a 2.67% two-year Northern Rock fix. Monthly repayments would drop by £145 giving overall savings over the two years of £3,480.

Buyers with 20% home equity have probably been paying an average 5.09% for their fix. If they took advantage of a two-year 2.47% fix from Northern Rock, their monthly payment would drop by £120.

Mortgage lending companies are still battling for business and now more of them are offering 90% LTV mortgages. Some lenders are also reducing charges significantly to help first time buyers get on to the housing ladder.

The housing market has been plagued by strict lending conditions for the last three years. Not only has this forced first time buyers into expensive rental properties, but people thinking of taking the next step up the housing ladder and moving home have had to put their plans on the back burner.

Hopefully by reducing the interest rates on home loans and making mortgages more accessible, the housing market will start to stage a recovery.

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Grant Shapps, the housing minister, last week called for long-term fixed contractor mortgage rates in order to help households struggling to organise their finances.

Last Thursday, Shapps called on mortgage lending institutions to provide and promote long-term fixed rate deals as a normal and feasible option. Currently there are no mortgages on the market with a guaranteed lifelong interest rate and any long-term deals that do exist generally require a huge deposit. However, in turbulent economic times, people need certainty. At present, the longest term for a fix for the majority of people is just five years.

The Minister did acknowledge that long-term fixes would not be right for everybody but he wants lenders to move towards a housing market which will allow first time buyers to purchase a home at an affordable price.

He would also like to see more portable mortgages whereby people moving home can take their existing deal with them. Furthermore, if mortgage interest rates where subject to a cap and collar arrangement, so that they can only increase up to a specified limit, borrowers would not be faced with sudden increased repayments.

However, some experts are not so keen on these proposals. Long-term fixed rate home loans first appeared in the UK in the 1980s, but the public were not impressed and take-up was poor.

We currently live in a world where a job is no longer for life, house prices are still too high and the average age of a first-time buyer is steadily increasing. Locking people into 30 years of debt and then penalising them if they want to repay the loan early doesn’t sound like the right answer.

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According to Bellway, the housing market is returning to normal. The firm made the statement last week when it announced both its sales and profits were recovering.

In the year ending 31 July 2011, the builder sold more than 4,900 homes, compared to just fewer than 4,600 properties the previous year. Bellway is confident that this upward trend will continue and expects sales to grow further this year.

The Group says it can build 6,000 homes without needing to increase corporate overheads and this would help it return to 12% margins. However, it is unlikely to see profit levels return to the boom years when house prices were rising quickly.

Bellway has moved its emphasis away from apartments to concentrate on family homes. Alistair Leitch, the Group’s finance director, said that despite the continuing economic pressures facing families, many are still moving home. People are now buying homes rather than houses, he continued.

Meanwhile, the CML has revealed that contractor mortgage lending has reached its highest rate in over a year as home owners take advantage of low interest rates and remortgage.

In the year ending August, the number of remortgages increased by more than 33%, with many homeowners using the funds to make home improvements. As the housing market improves and more people start looking to buy, people who have ‘done up’ their home will be in a much better position to sell and they will be the ones to benefit once prices start to move upwards again.

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