While it is true that individuals who take out home improvement loans are more likely to have an increased value in their home, with the market the way it is, it only makes sense to hedge your bets against failure. With a home improvement loan, individuals could take out the loan and conduct the repairs, only to find out later that the after repaired value is worth less than what they had originally anticipated. In this case, it doesn’t make sense to repair the domicile at all unless it is some type of critical roof repair or other faults.

“The monthly numbers of approvals for house purchase, which have fallen by some two-thirds over the last year, levelled off in July. It would, however, be premature to think that the housing market will now start to recover, because overall approval activity continues to be very low,” explained BBA statistics director David Dooks.

“The pressures on household budgets are reflected in the relatively weak rise in individuals’ deposits and, with consumer borrowing growing only slowly it seems that consumers are acting prudently.”

Commenting on the figures, David Ritchie, chief executive of Bovis Homes Group PLC said: “The Group has taken decisive action in response to the toughest period of trading it has experienced in its time as a public company.

Crawford McCaughie, chairman of CML Scotland Council, said, “There is no obvious sign that the market will open up again until 2009 or even 2010,” he said. “This is not a short-term problem. Everyone thought that it would last six months, and then six more months have passed, and then another six months. Unless there is a serious input of liquidity into the market I can’t see things changing in the near future.”

“Unfortunately, it is becoming harder and harder for the first-time buyer, those who typically need a higher loan to value. Lenders are looking at risk and would rather give a mortgage to someone who needs 75% of the value rather than a 90% loan,” Mr McCaughie added.

David Wishart, director of Lloyds TSB Personal Loans, said: “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.”

TV presenter and property finder, Phil Spencer, warned homeowners not to treat home improvement projects lightly: “In a buoyant market, people taking on a home improvement project could get away with less than perfect preparation or some slapdash sums, as their mistakes were covered by rising property prices. However, in today’s environment it is vital you plan any project thoroughly to ensure maximum return on investment.”

David Wishart, director of personal loans at Lloyds TSB: “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.”

Wishart added, “Whether your motivation is a quick sale, adding long term value or accommodating changing lifestyle needs, it’s vital you consider the financial investment you’re about to make. A personal loan can provide a hassle free, affordable way of spreading the cost.”

CML Director general Michael Coogan said: “Without action the situation in the housing market will be worse than it needs to be. The housing correction will overshoot, and the knock-on effects on the wider economy will be significant.”

Simon Rubinsohn, chief economist at the Royal Institution of Chartered Surveyors, said: “The latest numbers from the Bank of England demonstrate in the clearest possible way the consequences of the credit crunch for the residential property market. Unless the authorities take steps to restart the mortgage market the likelihood is that there will be more bad news in store for the both the housing market and retail sector during the latter part of the year.”

“The long-term need to provide more homes has not gone away. We have a growing and ageing population and will only see worsening affordability unless we increase the housing supply,” said Housing Minister Caroline Flint. “That means being ambitious, but also practical and realistic, acknowledging not only the difficulties faced by individuals and families, but for those who work in the house building industry.”

The CEO of the Housing Corporation, Steve Douglas, welcomed the new first time buyer mortgage scheme. “We believe that a Rent to Homebuy option will be attractive to customers in the current market and will help associations and developers manage their sales risk.”

“Borrowers with large mortgages have found themselves ostracised of late, with lenders viewing them with some degree of distain. Our new exclusives, launching this week, will now allow borrowers with mortgages up to £5 million to obtain a competitive rate. The range starts with a rate of 4.99%, but does come with a fee of 3%. However, this product has no Early Repayment Charges and will certainly suit borrowers who want to keep their payments low and their options open. Borrowers should contact Charcol for full details on this and the entire range,” stated Drew Wotherspoon, of the broker firm John Charcol.

He added, “As such, it is a really about taking a decision on future rate movements. I would strongly advise people to seek professional help before deciding if this is the right route for them.”

“Fixes are popular because the future direction of interest rates is so uncertain,” says David Hollingworth of broker London and Country. “There is a lot of noise out there and alarming headlines. People want stable payments. They want to dissociate their finances from rate moves.”

He added, “Being a quick mover is key if you want as low a rate as possible. In recent days the situation on the money markets has deteriorated further and the rates on two- and three-year offers are bound to rise to reflect this. Already both Abbey and Bradford & Bingley have increased the rates on their fixed deals.”

Drew Wotherspoon from John Charcol stated, “There are many things that can happen during a mortgage application that may result in a borrower being unable to complete. Traditionally, this has not cost borrowers anything other than wasted time and maybe some legal fees. However, should they not complete on a mortgage with an upfront fee now, it will cost them actual cash.”

“Being a quick mover is key if you want as low a rate as possible. In recent days the situation on the money markets has deteriorated further and the rates on two- and three-year offers are bound to rise to reflect this. Already both Abbey and Bradford & Bingley have increased the rates on their fixed deals,” added David Hollingworth of London and Country.