News of the upcoming shift for many lending institutions along with speculation that the current 0.5% low interest rate offered by the central banks has caused many borrowers currently on interest-only options to seek out other fixed-rate mortgage approval before their current mortgage expires, yet at the same time many people simply can not afford to make a move such as this given their own financial limitations. In fact, the new regulations being looked at by most major lenders throughout the country are only for those holding less than 25% equity in their homes – generally those individuals who do not have any additional funds to spare for another major mortgage change immediately should it be needed for their long-term financial benefit.

Despite the fact that this move may come as somewhat of a blow to many home owners throughout the country it is generally seen as a smart move by many economists in order to minimize the impact a second property crash may have on financial institutions. With even re-mortgages hitting an all time low and many people looking at minimizing their amount of extra capital used in the market financial measures are seen by many experts as needing to be taken sooner rather than later to curb any negative shifts occurring as winter approaches.

A mere two years ago re-mortgages on homes throughout the country accounted for roughly 75% of all mortgages offered to home owners, though since that time the number has remained in a steady decline and its current figures of approximately 40% are somewhat unnerving for many lenders. This is seen to be caused by a number of factors, primarily the continued low mortgage rates offered by lending institutions thanks the continued record low interest rates helping both tracker and fixed-rate mortgages as well as the fact that most people have moved away from general spending and debt accrual this year towards debt repayment and elimination.

In some ways the current trend is beneficial in the long run as currently a large number of individuals have substantial debt accrued in their names, with a large portion of pensioners also still maintaining debt on their homes well into retirement. In the short-run, however, concerns over the lack of lending are making many financial establishments worried over their cash flows and whether or not they will be able to maintain some current attractive offers on the market and still retain profitability.

As of yet the interest rates established by the central Bank of England are keeping most lending agreements low, though if rates continue and inflation picks up (as is being seen more and more often in recent months) then it is highly probable that home buyers and sellers alike can expect to see a much more competitive and difficult to navigate market looming in the future.

Still, many experts anticipate the total number to remain roughly the same in the near future, nether increasing nor decreasing substantially in the months to come. This prediction is based upon the fact that the low mortgage rates being offered by most lending institutions continue to help individuals keep their mortgage payments under control while at the same time allowing individuals ranging from first-time buyers to even those holding a bad credit mortgage to manage their funds accordingly.

While the economy as a whole is also generally being seen to be on the rebound in recent times and therefore hold the potential for short-term arrears reduction many experts also feel that this is not actually likely to be a sustainable trend as far as the real estate market is concerned and do not anticipate much impact upon arrears in the coming few months. In a longer term perspective, on the other hand, this may actually prove to be a valid recovery period that will allow many individuals to recover due to personal hardships over the past few months or years.

Unfortunately for many this recovery is generally seen by most as dependent upon whether or not the central banks continue to maintain their historically low interest rate, meaning that if inflation were to become too out of hand or other factors affect the economy too much in any number of ways the interest rate could be raised and many people may simply revert to previous conditions.

In terms of bank loyalty these figures do vary somewhat from region to region, with the South East of the UK coming in with average figures averaging 17.7 years of loyalty to their current account provider per customer. The North West, on the other hand, provides the opposite story of a smaller (but still impressive) 15.3 year average per consumer.

Many people feel that this trend is a result of a long-standing idea amongst consumers that, despite what most logic would argue, it is easier for an individual to file for divorce than to change their current account holder. This is even true in today’s market where many different financial institutions tend to offer highly competitive deals, especially in terms of the property market that is driving many consumers’ decisions due to the continued low mortgage rates offered by many groups for a variety of consumers ranging from first-time buyers to even re-mortgagers and general investors.

For many banks this news comes as somewhat mixed, being happy to retain legacy consumers for long-term profits of their own while at the same time being posed with a new challenge of attempting to convert consumers from other banking establishments to join them. Whether or not they can be particularly successful with the conversion is still up for debate given the highly volatile nature of the market at the current stages, but many people anticipate many banks revising their conversion strategies to become even more competitive in the future in the hopes of encouraging the switch and establish a larger customer base.

The recent rise in lending is seen to keep things on track with the Council’s earlier estimate that roughly £140 billion worth of lending will take place throughout the course of the year, though many people are still somewhat concerned over the slightly decreasing numbers while looking at a year-on-year perspective. The Council, on the other hand, feels that these concerns while valid are nothing to take too closely to heart as a large number of property owners continue to handle their funds adequately thanks in no small part to the continued low mortgage rates made possible by the Bank of England, thus allowing both the residential and commercial mortgage sectors to recover somewhat.

The recent cooling in terms of the substantial gains in some areas has also worked to the advantage of many local residents as overseas investment is dying down somewhat, with many investors looking to other areas for additional investment opportunities rather than staying within UK limits. This has caused many people to move to the South American and Asian markets in particular where large growth trends have been seen in a number of areas and allowed many local UK markets to handle more local matters independently.

Given the large range of potential criteria for each index a recent investigation has begun looking into the actual index usages by various lending institutions in order to determine just what is and is not taken into consideration in many cases. This has become a particular concern for many home owners and prospective home owners alike in recent months as house prices continue to fluctuate and many first-time buyers look to establish themselves in the market.

Should an investigation prove successful and help establish a more centralized index this could be good news for many individuals involved in the real estate industry, allowing a greater number of individuals to have access to the lowest mortgage rates possible in their area should the price index reflect positively and accurately at that time. This would apply to both tracker mortgages and fixed-rate mortgages as well, meaning that many owners will be better able to lock-in decent rates for an extended period of time to leverage their personal funds to the best of their own ability.

The review of the indexes used nationwide is currently being undergone by the National Statistician and is focusing particularly on those indexes generated by the Communities & Local Government department as well as the Land Registry in order to target the largest index reference points possible at this time.

According to Paul Samter, economist with the Council of Mortgage Lenders, the higher figures, despite being good news, represent a time for cautious optimism.

‘Our gross lending estimate of £13.1 billion in June represents a seasonal pick-up and is higher than June last year, but is still indicative of low levels of activity,’ he said.

‘There are signs of house prices stabilising and more properties coming onto the market following the abolition of home information packs. This may improve liquidity in the market, but transaction levels are subdued and likely to remain so while access to credit remains constrained,’ Mr Samter explained.

It appears, however, that any significant short-terms improvement is unlikely to materialise:  ‘The FSA has outlined a clear direction of travel as part of its mortgage market review. The consultation paper on responsible lending increases the regulatory burden on lenders and could make it harder for borrowers to access credit,’ warned Mr Samter.

Adam Challis, the head of research at Hamptons International, believes that the rescinding of the controversial Home Information Packs has aided the slight improvement in lending figures, along with a greater number of new mortgage products being made available.

Many also feel that practical solutions are also required to stimulate and encourage banks to fund mortgage lending. This problem is particularly acute as the Special Liquidity Scheme is set to reach its repayment phase in early 2011. At this point, banks will face real challenges to their will and ability to fund mortgage lending.

Fast-track mortgages and self-certification have long been the choices of self-employed property purchasers, however, under the new proposals released for consultation by the Financial Services Authority (FSA), they would be required to give proof of income that would need to come from an independent source as well as ensure that they will not fall under a bad credit category.

The FSA has proposed to introduce affordability tests for every mortgage in order to make sure that lenders return to what has been called “the basics of responsible lending.’ The authority did not illustrate precisely what criteria  should be used in order to gauge the mortgage affordability borrowers by the lenders. Instead, they stated that they might decide to undertake a ‘line-by-line’ assessment of each applicant’s outgoings. They could also decide to use either their own expenditure models or statistical data.

Affordability, however, should be based upon repayment mortgages instead of interest-only deals and should also factor in future interest rate rises based upon the term of a 25-year mortgage-even in the event that a loan has been taken out for a longer period of time.

The FSA also stated that those lenders lending to individuals with poor credit histories would need to implement stricter credibility tests and also to make certain that they had a buffer between income and outgoings. The FAS’s research indicates that borrowers with poor credit histories were much more likely to encounter repayment difficulties.

The research also shows that almost half of all mortgages instigated between 2007 and the initial quarter of 2010 were approved without the need for buyers to provide verification of their income. Also, it showed that some 46% of households taking out mortgages between 2005 and 2008 have either no money left or faced a financial  shortfall after making mortgage payments and meeting monthly living expenses.

It has been usual for borrowers to switch to their lender’s SVR at the end of their fixed-rate deals, and many have chosen to remain on such rates since the Bank of England cut interest rates to 0.5% in March 2008.

The percentage of borrowers on fixed-rate mortgages stood at its lowest rate for five years as of March and April, according to figures released by the Council of Mortgage Lenders. The figures also show that SVRs remain cheaper than fixed rates in general.

Lloyds’ SVR guarantee means that its 2.5% rate is currently the cheapest rate going, and borrowers have certainly made the most of it by sticking to it for the long haul. Lloyd’s, however, are set to introduce the new Homeowner Variable Rate this month, and the new rate will come into effect on June 1st, 2010 for those new customers taking Lloyds’ shortest fixed deal lasting for two years. The rate will not affect either existing customers or Bank of Scotland customers, as the BOS has its own SVR which stands at 4.84%.

Similar proposals were adopted by Nationwide and several other small building societies last year. It is widely thought that other providers will soon follow.

It may well be that the gradual drop in cost of fixed-rate mortgages may hasten a return back to fixed rates, which are currently at their lowest for 15 months. The average fixed-rate deal for two years now stands at 4.61% as compared to its peak level of 5.21% since base rates reached their trough.

Many in the industry often suggest that homeowners that are simply not interested in liquidating their properties see house price variations and fluctuations are irrelevant. Instead, the actual value of their property and what it is worth – irrespective of whether or not they are looking to sell – is always the focus of great interest. This factor is also of great relevance for those home owners looking to find a reasonable re-mortgage for their houses, as the value they will be able to get for their property will depend greatly upon the total amount of home equity they have.

New research from HSBC, however, indicates that house prices fluctuations may be very relevant indeed. Between September of 2007 and April of 2009 where the market saw high and low points for house prices in the UK, the values of properties dropped, month-on-month, thereby eating away at deposits and equities held by owners across the country in their homes. The figures come from the Land Registry.

Despite the fact that lenders throughout the country have always offered varied levelled mortgage rates in terms of both tracker and fixed-rate offers to their customers with varying levels of equity held in their homes, recent house price volatility as well as what is seen as the associated risk attributed to approving a mortgage for customers at a high loan to value amount has led to an ever-growing gap between rates actually on offer to house owners with small and large deposits.

As a result whether or not a homeowner is looking to sell their property taking the current market conditions into account the amount of real equity they hold in their homes is more important now than ever before -particularly for those homeowners looking to re-mortgage.