During the last six months, we?ve seen house prices rising substantially for the first time since 2007, which many have heralded as a sign that the economy is beginning to recover and the housing market will eventually rise back to its former glory. However, experts are now warning that the rise in house prices is only a temporary situation and homeowners should expect prices to fall again shortly.

A report from Nationwide suggests that house prices have risen for the fourth consecutive month in August, along with other figures which all sound like signs of a recovering market:

• The average price of a house rose by 1.6% during August
• Average prices have increases a total of 3.3% between June and August
• Overall, during the first eight months of this year, prices have increased by 3.2%
• The value of a typical property is ?160,224 which 14.4% below the October 2007 peak.

Even the British Banker?s Association has reported a massive 77% rise in mortgage approvals between July 2008 and July 2009, but despite what sounds like a huge jump on paper, approvals remain at an historic low, and financial experts predict that the relative buoyancy on the market isn?t set to continue.

A key sign can be found in house builders remaining wary of the market. Bovis homes reported a ?8.6 million loss during the first quarter of the year, noting that increased mortgage lending is still far behind ?normal? levels. The company adds that the industry faces many threats, including unemployment, the increased supply of property and the future for interest rates.

Lenders are still a long way from backing any large scale increase in the level of mortgage activity as they seek to recoup their loses. Michelle Slade, spokesman for Moneyfacts stated:

?Margins continue to be increased as lenders look to repair dented balance sheets. Normal rules where lenders pass or decrease rates based on the cost of funding seem to have well and truly gone out of the window.?

The low base rate has seen a huge drop in mortgage payments for many homeowners, which has lead to less properties being made available and creating a sellers market due to demand. However, this situation can only be maintained as long as the interest rates remain at a historic low. When interest rises again and mortgage payments once again become a problem for people, we could see the rise in house prices stall completely.

?It’s not difficult to explain why the improvement in housing market conditions may only be temporary,? said Sheena Shah, property economist at Capital Economics. ?After all, not only is the economic backdrop still weak, with the rise in unemployment showing little sign of coming to an end, but lending criteria remain a significant obstacle to buyers.?

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The credit crunch has made finding cheap loans considerably harder for many people. Although loans themselves are still readily available, finding an APR even in single digits has been incredibly difficult for many over the past year.

Building Societies, Banks and other financial institutions have become much more wary about lending money to people. To make matters worse, some have pulled out of the market completely reducing competition and paving the way for more expensive rates. Payment Protection Insurance has also been restricted leading many lenders to recoup loses into the actual interest rate itself.

Luckily there are some signs of light on the horizon for people who have a good credit rating but have struggled to find a loan to match. Several well known companies are offering very promising ‘typical rates’. A typical rate must be offered to two thirds (66%) of all successful applicants.

Amongst the companies offering these rates are popular supermarket retailer Sainsburys. The finance division of the company are offering loans at a rate of 7.9% APR providing you sign up to the Nectar loyalty scheme. This isn’t much of a catch however – the scheme is free, easy to sign up for and can actually save you money on various services such as electricity and telephone bills. The minimum loan amount to receive the low APR is £5,000.

Similarly the AA are offering an 8.0% APR loan providing you sign up through Moneysupermarket.com and apply for a minimum loan of £7,000. If you’re looking at borrowing far less than this, the Post Office has filled the gap, offering an appealing 13.9% on loans as low as £2,000. Abby Personal Loans offer an even better 8.9% for the same minimum amount, but you do need to be an Abby customer to take advantage of their offer.

As with any loan, it’s your credit rating that will finally decide your rate. These rates are given to the majority but not all successful applications. If you’ve affected your credit score in the past there’s a good chance you’ll either be rejected or offered a much higher rate.

It’s also important to watch out for the small print and make sure you aren’t paying hidden charges for administration or setup costs.

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