It was revealed this week that Banks are operating the highest profit margins on mortgage deals in 20 years.

Lenders are still reluctant to lend to house buyers despite the appearance of a lucrative market.  The bank rate is currently at 0.5pc, while some homeowners are paying 8pc interest on fixed rate homeowner loans

The average two-year fixed rate is now said to be 5.16pc per year, this gives lenders a profit margin of 3.11pc.  This is the widest it has been since 1988.   This margin has increased dramatically because of the credit crunch.  Lenders are being over cautious as they believe borrowers will default given the current climate.

It is still very difficult to get a mortgage if you do not have a large deposit.   Apparently one quarter of people who apply for a mortgage do not qualify.  Lenders would need to relax their restrictions before these people would be able to buy a property.

However, there are ways to improve your chances of finding a good deal, if you need to remortgage or you are a first time buyer.  If you do not have a 25pc deposit towards your first house or you have negative equity then your first step should be to contact your current lender or bank or building society.  Some banks are assisting people in negative equity by allowing a 125pc mortgage to enable people to move home.

Even if you do not qualify for any of the deals on the market place it is worth talking to your current lender to see what deals they can offer you.

If you are a first time buyer and have a 25pc deposit, plus a good credit rating, there are lots of good offers out there for you.

When borrowing money, make sure you check out what the arrangement fees are.  These are sometimes high, so be careful you don’t end up paying too much.