The mortgage market is expanding at its slowest annual rate in two years, according to Connells Survey & Valuation’s latest Housing Market Activity Report.
While the total number of residential valuations conducted during June rose by 16%, on an annual basis this represented an increase of only 2%, the slowest annual growth since July 2010.
Although first-time buyer numbers climbed by 19% during the month as the short-term effects of the stamp duty deadline rush dissipated, there were 1% fewer than a year ago, pointing to the historically difficult conditions for many would-be buyers.
“Despite making a short-term improvement after the post-stamp duty lull, there are signs that the mortgage market is tightening,” said John Bagshaw, corporate services director of Connells Survey & Valuation.
“The eurozone crisis has dampened banks’ ability to lend, while the double-dip recession is taking its toll on buyer finances. Much rests on the success of the Bank of England’s new funding for lending scheme. If it proves successful, lenders will be able bypass increasingly expensive wholesale markets, boosting the supply of finance and giving the valuations and wider mortgage market a shot in the arm.”
Remortgaging contributed to the slowing annual growth, with the number of valuations for remortgagors declining by 6% compared to June 2011, in spite of a 13% month on month increase. In total, valuations for remortgagors contributed to one fifth of all Connells’ business – the lowest proportion since May 2011.
Bagshaw said: “With inflation falling and the economy in recession, more quantitative easing has been on the cards for the past month, rather than any interest rate hike. This has removed the motivation for many on historically cheap tracker rates to remortgage in the short-term.”
Connells said the number of homeowners on the move played a crucial role in the monthly increase in activity, with 23% more valuations in June than in the previous month, contributing to an annual increase of 4%.
Buy-to-let investors also continued to grow annually, with 16% more than in June 2011. 32% more buy-to-let investors sought to remortgage than a month ago.
Bagshaw added “In a subdued market where finance is hard to secure – especially at higher LTVs – those with equity are better placed to move. With low rates and falling house prices in several areas, homeowners looking to upsize are taking advantage.
“Landlords, too, have been looking to capitalise on the market. Many are remortgaging to unlock funds to re-invest and boost their portfolios, but we’re also still seeing new investors enter the sector to exploit strong yields and historically high tenant demand.”