Plenty of homeowners see some room for improvement in their living space and are queuing up for loans, according to a new survey.

AA Personal Loans says that 25% of homeowners in the UK are going through the borrowing process for work during the recession and the company’s loan business has showed no downturn in applications despite current economic difficulties many people are facing.

Roughly an 12.5% of all loans go towards building a new room on to a home to create extra living space.

Mark Burgess, editor of Estate Agency Times, said: "Understandably, some people might not be keen to take out a personal loan at the moment, but additional bedrooms or reception rooms typically add the most value to a property."

The survey is supported by a Sainsbury’s Home Insurance study that revealed many homeowners are cutting improvement cost by turning their hand to DIY to renovate property.

Most home improvement loans range from £1,000 to £25,000 and cost roughly double the cost of a mortgage.

To find a cheap home improvement loan, consider looking at a comparison site like ours, where you can see a range of different loan options in seconds.

Many lenders - including most high street banks and building societies plus some specialist firms - offer home improvement loans. Like the name suggests, they generally come with a condition that the borrowing must be spent on your property and not on a holiday or other debts.

To make sure you get the best interest rate, make sure you compare like-with-like. For instance, the shorter the period you borrow the money over, the more expensive the loan,l so make sure your quotes are all over the same period or you may think one loan is more expensive or cheaper than another witghout realising the ‘term’ of the loan is different.

You should also consider a robust loan protection insurance to cover sickness, accident and redundancy. Again, an insurance comparison site like ours can find the best rate insurance to meet your needs.

Don’t simply buy the insurance offered by your lender - in many cases this is more expensive that other policies and often excludes much of the cover offered by other providers.

An alternative to a home improvement loan that may prove a cheaper option is a remortgage or further advance on your existing mortgage, so look up the cost comparisons against home improvement loans before making a final decision.

Adding living space to your home should prove an excellent long-term investment, because the more space you have, the higher the price when selling. Just watch out not to ‘over extend’ that can make your property too expensive for the area where it is located.

Banks and building societies are lending less money despite billions of pounds of taxpayers’ money paid out to keep them in business.

The Bank of England says that mortgage lending is at an eight year low - with the amount of loans offered in April £1 billion down on March.
 
Much of the decline is due to borrowers tending to stay on their lender’s standard rate rather than remortgaging to a better mortgage rate at the end of a fixed or other special rate deal.

Many are locked out of remortgaging because the equity - the mortgage free part of their home’s value - is too high to qualify for new borrowing as lenders tighten up lending criteria.

The Bank of England’s figures are in line with those issued by the Council of Mortgage Lenders, which shows a 9% drop in mortgage advances for April.

The Bank said data from the UK’s six biggest lenders showed mortgage applications had risen over recent months with buyers returning to the market.

Mortgage acceptance rates were broadly unchanged since the start of the year, although approvals for house purchases rose during April, building on increases seen in February and March.

The survey also showed that the rate at which unsecured lending - like credit cards and loans - is growing was the lowest since 1992 during for the period January 1 - March 31.

Unsecured lending acceptance rates by lenders were little changed during April and demand remained weak.

Interest rates fell slightly during March, although during the past six months they have fallen by ‘considerably less’ than the Bank of England base rate and inter-bank lending rate Libor.

Part-nationalised banks, like Royal Bank of Scotland and Lloyds Banking Group have announced multibillion-pound loan allocations for mortgage and business customers in return for state support.

HSBC, which has not received help from taxpayers, has also pledged to boost mortgage lending this year.

Despite these promises, the money for borrowers is more of a drip than a flood and little of the cash has hit the property market - and on the figures above, is decreasing.

Finding a mortgage can still be a daunting task unless borrowers have at least a 10% deposit - and with many lenders this is still not enough to get their best rate mortgages.

For prospective borrowers looking to buy or remortgage, a mortgage comparison site like ours can reveal the current best rate mortgages in seconds.

You can also use our site to look for the cheapest loan deals and best credit card deals.

Mortgage watchdog the Financial Services Authority is to ban self-certification mortgages after admitting mistakes were made in continuing to let lenders grant the loans to borrowers despite major regulatory worries.

The FSA is looking at the mortgage market to tighten up lending rules and this new review will probably spell the end for self-certification loans in the UK.

Self-cert mortgages - often called liar loans - were aimed at the self-employed and freelancers who had fluctuating annual income or difficulty in proving their earnings. Lenders generally charged a higher interest rate for a self-cert mortgage than for a similar product for a borrower who could verify income, so the loans were more profitable than standard mortgages.

Ending the ability to borrow this way will lock many more people out of the mortgage market - besides the self-employed and freelancers, the loans were also popular with borrowers earning irregular overtime or commission and contract workers.

Lenders allowed these borrowers to say how much they earned and then carried out no checks to confirm whether the stated income level was correct. They also allowed employees who should have been able to verify income with a reference from their employer to take out the loans as well.

The FSA’s retail markets marketing director Jon Pain told an FSA mortgage conference that at the height of the property boom, 45% of mortgages offered were self-cert loans with no proper checks carried out to verify income.

The FSA reviewed the market in 2002 and proposed a ban on self-cert mortgages for employees, but banks and building societies objected and the FSA took no action.

"The industry disagreed, and we relented," said Pain. "Since then, we have seen a significant increase in the amount of self-certified lending to employed customers for no perceptible reasons with hindsight, this may have been a mistake."

A further review was carried out by the FSA in 2004 and at the time, the FSA  stated that mortgage lending controls for self-certification products were appropriate.

Many firms let borrowers inflate their salaries to obtain bigger home loans, and many people on these deals are now in financial difficulty.

In his speech, Pain said a key problem was that lenders stopped verifying income when considering home loan applications. He said that in 2007, 45% of all mortgages were made without a check on the stated income.

The FSA is the government organisation charged with regulating financial services, including mortgage lending, in the UK

"Many of the specialist lenders heavily marketed and sold self-certified products, and a large percentage of these have led to correspondingly high levels of arrears and fraud," said Pain.

The responsibility of affordability checks and income certification was offloaded to the broker or financial adviser instead of the lender, added Pain.

"Given that so many self-certification mortgages have been sold, and so many of them are now in arrears, should there be more constraints on this type of lending?" said Pain.

The FSA is now reviewing self-certification mortgages again with a view to insisting on income verification checks for all mortgages. Lenders will have to check the financial documentation provided by the borrower before a mortgage offer is made.

Borrowing for mortgages is cheaper now than since 2004, but borrowers still need large deposits to buy and overall lending remains difficult to obtain, according to the latest monthly lending survey from the Council of Mortgage Lenders.

House purchase lending accounted for 35% of all mortgage lending in March, up from 31% in February and the highest proportion since December 2007.

Remortgaging accounted for a higher number of loans in March, but the number was only 8% higher than in February and 45% lower than in March 2008.

The CML expects remortgaging to remain muted, because of attractive rates automatically cutting in for many borrowers as they come out of their existing deals, and because of reduced remortgaging opportunities for those with lower equity as a result of falling house prices.

Within house purchase lending, first-time buyers accounted for an increasing share - 40% of loans, up from 38% the previous month. This is the highest proportion since April 2005, although the absolute number of first-time buyers remains low - 12,500, up from 9,200 in February but well below the 17,800 recorded in March 2008.

First-time buyers on average borrowed three times their income and 75% of the value of their property in March. Both these average measures were unchanged from February. For those with deposits large enough to enable them to buy, the combination of low interest rates and lower house prices mean that their monthly interest payment now equates to only 15.1% of their income, the lowest proportion since June 2004 (15.1%).

There were 18,900 home mover loans in the month worth £18.9 billion, up from £14.9 billion in February - an increase of 27%, but 34% down on March 2008. The average home mover loan was £115,000, compared with £135,000 in March 2008. Interest payments typically consumed 11.4% of a home mover’s income, the lowest proportion since January 2004 (11.4%).

Commenting on the latest data, CML head of research Bob Pannell said:  "Because the flow of lending is still constrained, there is a sharp dividing line in the housing and mortgage markets between those who can raise a substantial deposit and those who can’t.

"For those who can, the burden of debt payments is low and mortgage interest is consuming proportionately less income than for a number of years. This is good news for now. Even so, a mortgage is a long term commitment. People borrowing now should be mindful of the years ahead when interest rates eventually rise, as they will."

If you are looking for a mortgage to buy or refinance, then try a comparison site like ours for the best interest rates.

Homeowners or buyers looking for a best rate mortgage deal have to sift through more than 1,500 mortgage products on offer from banks, building societies and specialist lenders.

To be precise , it’s 1,589 mortgages.

A year ago, double that number of mortgages were on offer from a lot more lenders - some of whom have disappeared or been swallowed up due to cash problems.

In those heady times, few lenders required a deposit of more than 10% to buy a new home or equity for a remortgage. Because prices were spiralling upwards fuelled by property market inflation, it didn’t seem to matter and raising a mortgage was really no hardder than signing your name on a piece of paper.

Now, the cash or equity needed to secure a best rate mortgage might as well be a king’s ransom for some people because they have no hope whatsoever in raising the cash and are ‘frozen’ out of the mortgage market.

If you have no deposit at all, only 10 mortgages are on the market. Even if you have 5%, that only adds another six to your options and at 10% deposit you have 112 mortgage products to choose from.

One way mortgage lenders are controlling the quality of their customers and the risk of a mortgage becoming a bad debt is by increasing the amount of deposit required to obtain a new mortgage.

The table below shows just how many products are available for each 5% of equity:

The best mortgage interest rates also depend on the amount of cash the borrower puts in to the deal - the best rates are for the best customers, who in the lender’s eyes are those borrowing the least percentage of money against their homes. Anyone looking for a top rate deal with a 5% deposit might as well give up right now because the juicy rates are reserved for the 60% equity customers.

Now take these equity figures and compare them with the latest completed sales figures from the Land registry and the biggest housing sale activity took place in homes priced between £50,000 and £250,000 - with 19,648 transactions in England and Wales.

The average house price for homes in England and Wales was:

To get the best rate mortgage for a terraced house, a borrower needs £56,958 equity and just over £57,000 for a semi or flat. This may be achievable for someone who has lived in a property for a long time or has substantial savings, but for the average first time buyer, pinning hopes on a low rate mortgage is a pipedream.

The fact is mortgage lenders are trying to lure borrowers with headline grabbing low rates that most can never hope to claim because they are shut out by lack of cash.

Finding a best rate mortgage deal is easy - just use a mortgage comparison site like ours, but getting an offer might take a little more work.

Fresh efforts have come from the government to help banks recover from the effects of credit crunch and in turn kick start the British Economy. As part of the Bank Bail-out plan, insurance programs will be rolled out to banks to ensure they stop losing money on bad debts, which is seen as the starting point of the credit crunch.

The government initiated insurance plans will protect banks against bad credit and bad mortgage debts. An insurance program will be set up by the government to ensure that banks assets are not under risk anymore. The hope is to help banks to start lending to individuals and businesses which is essential for the recovery of the economy. The Prime Minister Gordon Brown is very positive that this bail-out plan will be a turning point for the recession stricken British economy. Under this new insurance scheme backed bail-out plan, banks have to work closely with the government. The treasury will set up insurance programs that will meet up to 90% of the additional loss suffered by the banks due to bad debts.

By helping banks to recover faster from their losses and protecting them from further loss, the government hopes that they can resume their normal business. Taking insurance from the government will also bind the banks legally to lend more to individuals and businesses. The government is encouraging the banks to start lending to businesses as well as individuals under the new bail-out plan. This will ultimately help small businesses and individuals who are finding it extremely difficult to get any credit these days. However, the banks will be paying for the insurance though not in the form of shares.

Bank of England, which was buying assets only from financial institutions and other banks so far, will be able to now buy assets from all types of companies directly. It will be able to buy assets for up to £50bn. The acquisition of the assets will be done by a subsidiary company that is set up for this purpose. However, the bank’s executive will still be the one who will decide on the companies from which the assets will be bought and the nature of the assets to be bought. Corporate bonds are included in the list of assets and this makes it possible for companies to borrow money from the Bank of England directly.

There are mixed opinions about the latest bail-out plan from the government. For instance, Vince Cable, the Liberal Democrat treasury spokesperson says that nationalising the entire banking sector would be the ideal solution rather than offering insurance schemes to encourage banks to lend more. He reckons this will be a very slow and long winded process to recovery. Its more of a gamble then anything else.

Under this insurance based bail-out plan, banks or financial institutions with over £25 billion of eligible assets will get first preference for the insurance program. Furthermore, there was an announcement from the government that it is increasing its stake in RBS by 12%. This takes the figures from 58% to 70%.

 This year, has not been a favorable one for the banks especially here in UK. The banks are now facing a new challenge posed by the unprcedented discovery of thousands of unfair loan deals. According to Consumer Credit Act (1974), consumers can challenge the validity of their loans under the pretext of “unfair relationship test”. If you have a personal loan with a current balance of £5,000 to £25,000, which were made active before April 2007, you can be eligible to make unfair loan claims after appropriate scrutiny. With these unfair loan claims, the UK banking industry can lose billions of pounds in consumer debt. It has been estimated that a shocking 60% of personal loans are unfair and as per insurance experts, around 79% of the loans are vulnerable to full legal challenge.

The reason for this fiasco is because the banks may be receiving higher payments from their customers than the agreed values through incorrect wording or poor documentation. Unfair Made Fair is taking the lead in evaluating the loans and if they discover that the loans are unfair then you can process your claim. According to the director of Unfair Made Fair and sitting magistrate Alan Kneale, if the loan documents are unfair, then consumers can sue the financial institution seeking compensation for the negative impact their unfair loan had on their credit score. He said that there is clear evidence which shows that a number of high street banks have as many as 30 loan agreements in force and most of them are unfair because they have not been rewritten from scratch rather they have been, “added to, altered, plagiarized, cannibalized and amended”.

There are number of factors which will effect the validity of a consumer claim. Following are some of these factors

• Discrepancies in the total value of the credit owed
• Number of dues
• Rate of interest
• Frequency of repayments

If there are any drafting errors in the above listed areas then it will make the loan balance null and void. According to court’s rulings, such loans will automatically become ‘contingent liabilities’. This will have an extremely negative impact on the balance sheets of the banks especially in a situation where they expected to raise billions of pounds to fight liquidity.

There will be a deadline fixed before which the claims can be filed so that it does not remain open perpetually. Therefore, Unfair Made Fair has requested consumers to review their loan documents if they should have even the slightest doubt. In this scenario, banks have very little grounds to defend themselves. According to legal experts, if you have any Payment Protection Insurance that you got along with your loan, then your claims have better chances of success.

This problem could have been easily avoided if only banks were careful with their documentation. It is hard to believe that how some of the high street banks can be so unprofessional in their approach, which has lead to their own loss.