With house prices having fallen eleven months in a row (according to figures from Nationwide), buyers poised to step on that first rung are waiting in the wings. So what are market conditions really like?

Well, according to the financial papers, prices are set to still fall, which is why many potential buyers are still holding back.

This may be bad news for those desperate to sell, but for those looking to finally be handed the keys to their own home, the news is great.

Many of these would-be purchasers have been saving up for years, watching prices soar further and further beyond their reach. Provided that they haven’t given up and dipped into their funds, they could be on track to buying their dream home in the next year.

One of the only dampeners that buyers should be aware of is the difficulty right now in getting a loan. Existing home loan borrowers have an easier time, should they find a buyer, as they have a proven credit record on their side and probably a chunk of equity in their property.

Lenders are now asking for as much as 25% deposit – compared to the 100% or even 125% loans that were being offered when prices were still rocketing. Unless you have a good credit record and a hefty chunk of savings, your dream property might not be as close as you think.

So, potential buyers could be wise to use their credit cards and take out cheap personal loans – provided always that they make repayments promptly. By building up a good credit record before they look at getting their home loan, they stand a great chance of getting that mortgage approval they need.

First of all David Miles, chief UK economist for Morgan Stanley warned that house prices are going to drop by 10% in the coming 12 months. Mr Miles believes that house price growth was largely fuelled by speculation that prices would always continue to rise as well as the belief that the number of people buying properties would increase by 10% in each coming year.

However Mr. Miles also believed that falling house prices would not be such a bad thing for the economy since it would help redress the affordability issue in the market which has spiralled out of control in recent years.

Meanwhile, Capital Economics chief economist Roger Bootle predicted that prices in 2008 would drop by only 3% followed by the same amount in 2009, an optimism that many wish were true.

The reality is that thousands of pounds have alreeady been knocked off the price of the average house in the last six months and prices are set to fall further.

Mr. Bootle says that the drop in house prices has little to do with the credit crunch and more to do with a drop in interested buyers, the number of which have been falling for the past six months. Additionally, with home loan rates still high, despite the three base rate drops since last December, many borrowers are actually unable to get the loan they need to take advantage of lower house prices.

According to Mr. Bootle the two fundamental reasons for the house price slump is the 5 consecutive interest rate rises between August 2006 and July 2007 and the fact that the property market is now too expensive for most potential buyers.

Whatever the reason, there is no doubt that house prices are falling, and in what has been described as an over-inflated market, this is probably no bad thing.

There are a number of options available to anyone seeking a new home loan however, because finding the right mortgage product is very important. The fixed rate mortgage could avoid the risk of further rate rises in the future, but lenders are also aware of this and increasingly fixed rate home loans come with shorter and shorter renegotiation periods as well as increasing renegotiation charges. So whilst taking out a fixed rate mortgage is always an option worth considering it may not necessarily be your best one.

There is no avoiding the fact that as interest rates stay high, our loan repayments will be steep. Add to this the increasing fuel and food costs and many people are worried. So what are we supposed to do to protect ourselves from getting out of our depth and falling into financial difficulties?

Some lenders have introduced a new option that while slightly unorthodox could be worth some serious consideration. Lenders such as Barclays are allowing borrowers to split their mortgage into two and have half on a fixed term basis and the other half of the loan on a tracker basis. This takes out some of the risk for the borrower but will mean taking extra time in searching to find a lender who is willing to make the deal with you.

The arrangement fee could be higher than with a non-split mortgage and the time in finding the mortgage could take twice as long, however you are splitting the risks involved and if you don’t like to take chances with your money than this could be the option for you. With inflation still running high, cost of living rising sharply but no matching rise in wages, it is wisest to play a cautious game when it comes to your mortgage.

The growing concern over the state of the economy is making many people more unwilling to overstretch themselves by buying a new home now. New figures published by the Halifax have shown that house prices fell by their sharpest rate in more than fifteen years in May.

Many buyers were hoping for a fall in borrowing costs when the Bank of England dropped the base rate to 5%. However, lenders have been unable to pass on the cut as the Libor rate remains high and liquidity low. Loans of all types have been affected.

The Bank of England is due to announce its latest interest rate today and is widely tipped to leave the rate at 5%. Consumers may feel this is a blow, but with the Government worried about inflation, the Bank is unlikely to cut the rate again yet.

Halifax’s chief economist, Martin Ellis, said: “The decline in prices is caused by the difficulties created for potential house purchasers by the rapid rise in house prices in the last few years, a squeeze on spending power and the reduction in credit availability,”

Halifax warn that house prices could continue to drop next year. This is potentially good news for those waiting to afford their first home, but may still not be enough to counteract the credit crunch.

Britons have seen their wages rise 4% in the past year, a stark contrast to the 9% rise in fuel prices seen and the 7% increase in food costs.

Sadly for many, property rental prices have also been increasing as more buy-to-let investors pull out of the market, leaving a diminishing pool of properties available for rent.

The figures were released by the British Bankers Association (BBA) and show that just 44,105 home loans were lent by its members last month. This is the lowest level since they started recording home loan approval rates back in 1997. This figure is down by 37% on the same time last year.

The government has also released figures showing that the economy is beginning to hit a slow down as well. It had been predicted that the economy would grow by 0.8% in the third quarter of the year, however because of the impact of the credit crunch and the rise in interest rates gross domestic product only grew by 0.7%.

The chancellor Alistair Darling has a target of 3% growth in the economy this year and despite the slowdown the economy is still well on track to meet those growth targets. Growth is now expected to be 3.2% instead of the 3.3% that economists had been predicting.

One of the lead economists for the Royal Bank of Scotland (RBS), Geoffrey Dicks stated that “the third quarter market the slowest economic expansion for a year and serves to emphasis that the economy passed its cyclical peak even before the full impact of the credit squeeze.”

As banks continue to tighten their belts when it comes to lending borrowers are being warned to prepare for rejection when they apply for a credit card. The people that are going to find themselves most likely to be refused are those with imperfect credit histories.

In the recent past it was assumed by most people that only those who had very bad credit histories, recent first time buyers and some buy-to-let investors were the ones who would find it difficult to secure credit. However times have changed in the wake of the credit crunch and more and more people are finding that they too are being rejected for credit.

Customers applying for cards and personal loans are finding that credit scoring has become tighter, with lenders giving more stringent reasons for turning down an applicant. Last year an applicant might have got away with making the odd late payment on a card or loan and it not affecting their credit score, but this year it’s a different story.

It has been revealed that the number of applications for credit cards that are being rejected has gone up by as much as 17% in the past six months. This means that roughly 3.27 million people across the UK have been refused credit in that period. This is a half a million more people than were rejects in the six months leading up to March 2007. Those of us who are most likely to see or application for credit rejected are people in the 25-34 year old age bracket.

Banks are also becoming increasing choosy over who they are willing to lend money to because the pool of money they have to disburse is so much smaller. With so many people looking for bad credit loans or low-deposit home loans, there are going to be a lot of disappointed borrowers.

Currently banks and lenders are reluctant to take on mortgage debt, but this BoE scheme will allow them to use government bonds, enabling them to operate normally during the credit crisis and rumoured world recession.

BoE Governor, Mervyn King, is confident that this move will raise liquidity on the money market and improve financial confidence.

The scheme allows lenders to swap current mortgage debts for the bonds, and whilst it is only applicable for existing loan business on lender books, it will still free up funds for first time buyers who are currently unable to secure a mortgage.

The scheme has the full approval of Gordon Brown, who said: “We can get markets working again in a way that we can ensure that jobs can be continued, and of course businesses can have the finance they need.”

Since the American sub-prime mortgage crash, worldwide investors have been reluctant to allow their funds to be invested in the UK home loan market. This has left a shortage of funds available for mortgages, with even banks being reluctant to lend to each other.

The Council of Mortgage Lenders warned, however, that this move would not necessarily see cheap loans reappearing on the market.