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The number of homeowner loans, mortgages, that were approved in December 2006, was down to 113,000 approvals from 129,000 in November.

Alone, these figures may be interpreted as evidence that the property market is about to slow, except for the fact that demand still outstrips supply, especially in the area of buy-to-let, and eco-friendly homes.

The Nationwide building society said that house price growth slowed in January, following recent interest rate rises. However, it still grew 1.8 per cent, maintaining an annual 10 per cent increase.

However, people who are anticipating putting their home on the market are still enjoying a ‘seller’s market.’  December is traditionally a quiet month for house buying..

However, approvals are regarded as an important indicator of short-term trends in the housing market. The market expected a short term drop after the Bank of England increased interest rates four times in approximately six months.

Investors are not worried. They still point to the fact that interest rates are still far below historical numbers, and that they are still below the ‘wealth building’ break-off point of six percent.

At £10.6bn the money lent in the form of homeowner loans during December was another record, even though the banks approved less loans, reflecting the strong rise in house prices in the past few months.

The investors are not worried. There is still plenty of room to take out a secured loan to improve a home, or prepare it for the buy-to-let market, and make a substantial profit, especially in the London areas.

If you are planning on purchasing a property with the idea of renting it out to tenants, then there are a few things you will need to consider.  You will first need the financing to purchase the property, and then you will additional financing for the upkeep of the property.

When you look into financing for the property, one option to consider is buy to let mortgages.  These mortgages are available to those who wish to purchase a property with the intention of letting the property out to tenants.  Because of the increase in property value and the low interest rates that are being offered, many people are starting to invest in property, and buy to let is one form of investing.  A buy to let mortgage differs from a residential mortgage in the sense that lenders require a larger deposit on the loan, typically a minimum of 20-25% on the property value.  The lender will also look at the rent potential of the property, deciding whether or not they will offer you a mortgage based on the potential of being able to rent out the property for a reasonable price.  The interest rate on a buy to let mortgage is also slightly higher than residential mortgages.

If you are able to provide the financing for the purchase of the property, you will then need to consider if you will have enough to cover the upkeep of the property.  Although you automatically expect the rent to cover all the expenses, you will need to make sure that you will break even or profit from your property.  Additional costs you will need to consider when letting out your property include, letting agency fees, service charges, insurance, gas and electrical appliances, furnishing, decorating costs, and legal insurance.  All these costs can add up.  Owning a property and letting it to tenants, can be a big task and a financial risk if you are not careful and outweigh all your options.

If anyone is wondering whether they should borrow money to improve the cost of their home, they need to spend a little time looking at the ‘bottom figures’ of the current housing market.

More than 1,352 streets in England have an average house price of £1m-plus.  In 2000, only 322 streets had an average house or flat value in the seven-figure levels.

According to property information firm Mouseprice.com, this estimate is conservative.  It excludes streets where there have been too few sales to create an accurate average, or there are too few houses to provide an accurate record.

Every day, 15 homes in England and Wales are sold for £1m or more, according to the Land Registry. This includes three sold for more than £2m, a price with monthly mortgage repayments of £14,500.

What does this mean? Millions of people who purchased before the boom, before 2003, are sitting on a fortune.  Many people have seen their personal wealth grow be several hundred thousand pounds within less than five years.

Last year the average house price made the news when it reached £200,000.  Those homeowners who took out 40 year mortgages, and interest only homeowner loans were criticised. However, many of these people have watched their home prices grow to £300,000 in less than a year.

The most expensive place to live in London is Kensington Square. The average value of a home is £5.5m.  However, this is not the top.  Four flats are currently being sold in Hyde park for £85m each.

The demand for Equity Release products from lending companies is decreasing. UK homeowners withdrew less cash from their property as the cost of borrowing is starting to make borrowing unattractive, according to new research.

The Bank of England shows that mortgage equity withdrawal fell to £15.0 billion in the second quarter from £15.4 billion in the first quarter. This could be due to many trends, not excluding the affordability of secured loans, the housing market spike, and higher interest rates.

When homeowners remortgage their properties, they often look to borrow more money against the value of their homes. This releases equity, but the length of a mortgage can add hundreds, even thousands, of pounds to a modest loan.

Consumers use mortgages and loans to release equity, to pay off unsecured debt or to invest.  However, a trend shows that much of the equity is used to finance home renovations. This new trend could be fed by the consumers desire to cash in on the current housing market.

The Monetary Policy Committee justified their two interest rate increases by expressing concern over UK consumer’s surge in borrowing, particularly when they borrow unsecured loans on their credit cards.

The concern is that equity, a long term asset, is being sacrificed to feed a consumer’s desire to live a certain lifestyle. This trend to ‘live a better lifestyle’ is causing many consumers to face repossession and bankruptcy.

The figures do not indicate whether the bank’s stricter criteria for borrowing loans, or the interest rates, are slowing the consumer’s desire to borrow, or whether consumers are turning to unsecured loans via their credit cards.

Housing minister Yvette Cooper has warned that parents could be under increasing pressure to help their children finance their entry to the property ladder if opposition to new house building continues.

The Bank of Mum and Dad appears to be alive and well, with 14,000 people a year releasing equity from their homes to buy another property for themselves or family members, with the average sum withdrawn standing at £74,000.

The latest government statistics also show that the percentage of young people under 30 who are buying their own home has fallen from 40 per cent in 2001 to 34 per cent this year. In contrast, in 2001 33 per cent of under-30s were renting a property. This percentage has increased to 41 per cent in 2006.

In response to the situation and to tackle long term affordability problems, he government has said it needs to build more than 200,000 new homes a year. House building levels have already increased from 130,000 in 2001 to 165,000 in 2006. The government will soon publish new planning guidance to support house buildings and encourage councils to build new homes for their communities.

Housing and Planning Minister Yvette Cooper said: ‘Many people are still opposing the increased housing we need so badly. Yet it won’t just be young people who lose out if we don’t build the new homes the next generation needs.  These figures show their mums and dads will feel the heat too. It’s also unfair on people who can’t get family help to get them started.  People’s chances of home ownership should not depend on whether or not their parents or grandparents were home owners before them.’

Scottish Widows Bank is to enhance its Own Overseas service, which caters for UK residents who wish to buy a property in Spain. The service offers flexible Spanish mortgages as well as help with the buying process. The bank aims to make the service accessible to both current and new Spanish holiday homeowners. It has there for announced a remortgage package which may offer an alternative for those who already have Spanish mortgages.

The Own Overseas remortgage package will see the notary and registry fees paid by the bank, while customers can add the fulfilment and valuation fees to the mortgage, leaving just the stamp duty costs to pay. The products now has a tiered free structure and a tiered rate for customers taking Euro or Sterling mortgages. Customers will also be able to choose from interest only or repayment mortgages.

Gordon Bowden, Business Development Director at Scottish Widows Bank, commented: ‘Despite the significant size of the market, remortgaging isn’t common in Spain - largely due to a lack of attractive remortgaging packages from lenders. According to Datamonitor in their 2004 Buying Property Abroad report there were approximately 540,000 Britons who owned a holiday home in Spain. Within this group, there is likely to be a significant number of people who could benefit from a more competitive deal.’

He added: ‘The Scottish Widows Bank Own Overseas remortgage package offers a cost-effective solution to existing owners and investors looking to remortgage on their Spanish properties.  By covering the notary and registry fees and allowing customers to add the valuation and fulfilment fees to the loan, our remortgage package aims to make the transfer to a new lender as easy as possible. ‘

The Bank of England revealed that mortgage approvals peaked in October, evidence that the increase in interest rates failed to derail the property market and reign in inflation rates. The net mortgage lending rose by £9.8bn, resulting in the biggest increase since September 2003.

Karen Ward at HSBC said the housing market “continues to surprise on the upside” but that “the implications of the lending data for consumption are not clear cut.” More than 128,000 consumers received approvals for homeowner loans, the highest number since December 2003.

The Bank said that growth in ‘broad money supply,’ or M4, was up 14.1 per cent.  Total net lending on both secured and unsecured lending increased by £10.9 billion, another increase from the £9.9 billion rise in September. This registers the biggest increase since July 2004.

“Therefore today’s data are likely to enrich the monetary policy committee’s discussion of the risks but is unlikely to alter the MPC’s central projection.”

This solidifies the likelihood of another interest rates increase early next year.

Howard Archer, chief UK economist at Global Insight, said: “While the Bank of England has recently played down the role of house prices in its setting of interest rates, it will nevertheless be concerned about the market’s current buoyancy.”

It is unsure whether these figures reveal a high level of consumers rushing to purchase homes before the price became prohibitive, or whether the proposed interest hike earlier this month spurred the increase.

The November interest rate hike has not slowed the housing market as expected, and there is little data to suggest that another increase early next year will have the desired effect.

On 20 November 2006, The Council of Mortgage Lenders (CML) called on the government to support mortgage borrowers who find themselves having difficulties meeting their repayment demands.

The CML’s members include banks, building societies and lenders who represent 98 per cent of all residential homeowner loans in the UK. The current total is 11.6 million homeowner loans worth more than £1 trillion.

The CML hopes the government will create a safety-net for consumers who borrow homeowner loans with the purpose of reducing payment arrears and repossessions.  The CML reveals that half the UK’s poor are also home-owners.  The government’s safety-net measures lean toward people in other residence.

The CML believes the government can redress the problem by increasing the £100,000 maximum mortgage sum eligible for income support.  This benefit will pay a portion of the interest owed by a struggling homeowner. The CML reminds the government that the threshold was last increased in 1995.

The level of support offered homeowners is at its lowest level in the last 20 years.

Commenting on today’s proposals, CML head of research and information Bob Pannell said:

“Home-ownership is far and away the most popular tenure in the UK. But it is surprising that at a time when the government is promoting the wider benefits of home-ownership, the safety-nets it has in place to help struggling home-owners are being neglected.”

“We strongly urge the government to demonstrate its commitment to sustainable home-ownership by reviewing how the benefits system helps home-owners who find themselves in difficulty.”

The battle between the homeowner loan companies, mortgages, is treading into unknown areas. Lenders are desperate to collect as many accounts as possible before the current housing market cools down.  This involves weaving mortgage contracts that contain fees the consumer is not familiar with.

Most consumers believe that today’s mortgage contract will be similar to their parents, or even the mortgage contract they signed ten years ago. This is not true. Banks are bombarding consumers with mortgages that lend five times the borrower’s income, or are interest only homeowner loans.

The lenders are advertising low interest rates, a welcome relief after two interest rate hikes.  However, consumer advocate groups are warning consumers to read the fine print, and have the fees explained, before they sign the contract.

Some homeowner loan brokers are charging as much as £4 000 for a £120 000 mortgage. However, according to independent research these fees can vary.  Fees can range from less than £499 and rise to as high as £2400 for the exact same mortgage, from the same lender.

Some lenders are using fees as a means of recouping their loss. The interest rate is dropped on the homeowner loan, but the difference is paid in the loan.

Consumers can do their own shopping around, or they can hire a broker to wade through the different companies.

The current ‘panic’ resulting from housing prices that increase almost daily, are causing some consumers to feel pushed to accept their first offer. However, it is possible to ask mortgage companies what their rates are before considering which ones to deal with.

Many professionals starting out at the beginning of their career will be all too aware of the time it takes for their career to start paying them dividends. Many of those in the country’s highest paid professions start out their careers on comparatively low salaries, as well as being straddled with the debts of years of study.

This fact has not been lost on HBOS, Britain’s largest mortgage lender which announced on the thirteenth of November that it will be launching a new mortgage lending up to 125% of the price of a new home to such cash strapped professionals.

It is expected that the loans will be used to help get young professionals onto the property ladder while also leaving them with enough cash to pay their stamp duty, legal fees and pay for furniture and improvements for their new homes.

Some however, fear that such large loans will make it ever more difficult to keep up with repayments and say that repossessions will increase as a result of such lending policies. A spokesperson for the Citizens Advice Bureau said that such mortgages could mean as much as half of a borrower’s monthly income will go towards mortgage payments and that such borrowers will be extremely vulnerable to increases in interest rates.

The new loans will only be offered through independent mortgage advisors and will not be offered in the banks branches. The bank has also said that it will operate extremely stringent criteria to ensure that only those borrowers who will be able to afford the products will be able to take them out. According to the bank this mortgage is a “niche product” and will only be targeted at appropriate customers.

The loan will require a 5% deposit on the cost of the home. Borrowers will then be able to borrow 95% of the house price on a secured basis, with a further 25% being offered as an unsecured loan. Both loans will be repaid in a single monthly payment.

Many have also criticised the high rates of the new loans,  which vary depending on the type of loan offered. Customers opting for a two year fixed rate will pay 5.89% for the first two years, which will revert to 7.09% thereafter. Many customers would be better served opting for a traditional loan and then seeking unsecured finance from more traditional sources at a lower rate.