While this whirlwind of volatile market conditions and home equity loan details can be difficult to digest and understand, it is very clear that there is no end of individuals who are attempting to make home equity loans that are worth less than the equity that is in their home due to the fact that the current housing prices have declined so much. With this type of effort, it is easy to see that there is a reason for the great demand on home equity loans, as the credit crises and the recession continues to hammer down on the average citizen trying to make ends meet.

“Availability of mortgage deals remains the biggest issue for borrowers who do not have equity in their homes. Those who have benefited from the decade-long housing boom can still qualify for the most competitive rates.” says Francis Ghiloni, marketing and business development director at mform.co.uk.

“First-time buyers or those who have entered the property market recently will struggle to qualify for the most competitive rates. That makes it even more important for borrowers to focus on the true cost of their loan including all fees and not to simply focus on rates. There are still competitive deals and lenders willing to offer 95 per cent loans but the most competitive offers are being restricted to people with big deposits or substantial equity.”

Gerry Bell, head of mortgage marketing at GE Money Home Lending, said: “Multiple failed applications can be time consuming and, of course, can be detrimental to a borrower. With criteria changing regularly and the risk of decline increasing all the time, it is even more important that borrowers looking to obtain a mortgage use reputable mortgage professionals with broad experience, knowledge and systems at their disposal which will increase the chances of the borrower getting the deal they need.

“The focus in the mortgage market is now on availability more than anything else, with financially strong and experienced lenders the most likely to offer credit. In addition there are a number of dedicated specialist lenders with strong pedigree who may be able to help meet borrowers’ needs.”

David Wishart, director of personal loans at Lloyds TSB, said: “In recent months we have seen a significant increase in home improvement personal loan requests.

“For the last decade homeowners have been able to sit back and rely on rising property prices to increase the equity in their home but sadly this is no longer possible.

“If you want to trade up and avoid substantially increasing your mortgage, you’ll need to add value to the house you’re currently in.”

Ray Boulger, technical manager at broker John Charcol, states, “If some of the over-supply of housing stock in city centres like Leeds and Manchester was bought cheaply by the Government, it could be sold cheaply too,” he acknowledges. “But first-timers should still be wary of new-build. Developers like George Wimpey are also offering their own schemes where buyers pay for just 75 per cent of the property, giving back the 25 per cent to the developer when they sell. These schemes may provide better value, as new homes cost between 10 and 15 per cent less than this time last year.”

“When homeowners come to sell, they pay back only the percentage of the property that the equity loan represents,” says Mr Moss at Best Advice, which offers My Choice HomeBuy. “So in a falling market, this will be less than you borrowed.”

Andrew South, a credit analyst at S&P, said: “The downward trend in UK house prices now seems well established, and we expect prices to continue falling in the near term.”

Liberal Democrat Treasury spokesman Vince Cable said: “When I warned of this degree of negative equity a few months ago I was accused of excessive scaremongering. But the idea of nearly two million homeowners facing negative equity is now regarded as mainstream by many experts.”

The Director of FairInvestment.co.uk, James Caldwell stated, “Mortgage rates have continued to rise over the last few months, despite the Bank of England base rate either remaining the same or being cut. However, what goes up must come down, as we are seeing with house prices so there may be some hope for those facing a remortgage in an increasingly unforgiving market.”

“A year into the credit crunch, there is no merit at all in waiting until the autumn before taking steps that will help the housing market to remain more resilient,” said CML director general Michael Coogan.

“Interest rates in the equity release market still remain competitive. Fixed rates for lifetime mortgages average 6.5%. Whilst reports show a decrease in property values and a slowdown in growth, those requiring equity release are taking the decision to release equity now before further falls may incur. Drawdown also provides an ideal solution in the current climate. Borrowers can lock in a drawdown facility which is protected with most providers against property value fluctuations. This gives peace of mind that funds will be available now, and in the future, without being effected by the volatility of the property market,” states Dean Mirfin, of Key Retirement Solutions.

Dean Mirfin, Business Development Director at Key Retirement Solutions said: “Whilst this analysis is based on those who have released equity from their home, if this is only part reflective of pensioners as a whole, then this is of huge concern. The rising cost of living is increasingly affecting all of us today, but it is the older generations that are feeling the pinch more than others. With new estimates from Age Concern putting the number of pensioner households living in fuel poverty at 2.25 million, with an estimated 250,000 pensioner households pushed into fuel poverty by the price rises this year alone, many have little income left to enjoy their twilight years.”

“This lull is feeding itself. There is a lot of equity out there, but no one wants to be first to move. It’s the classic fear and greed syndrome,” said Jeff Jaconsen, the head of finance firm LaSalle. “A hedge fund manager said to me once — I am willing to risk the first five percent of a rally because if I catch the trend correctly, I’ll still make my return — but you never know until afterwards whether you were right to step into the void.

“In the UK, where prices have adjusted fastest, we are dipping our toes. We have bought from open-ended funds at yields a lot wider than appraised values. We have bought at 6.5 percent versus 4.5 percent 18 months ago.”