Mortgage market crawling

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The UK mortgage market is growing at its slowest annual rate in two years, according to the latest Housing Market Activity Report by Connells Survey & Valuation.

While the number of residential valuations conducted during June rose by 16 per cent, on an annual basis this represented an increase of just two per cent, the slowest annual growth since July 2010.

Although first time buyer numbers climbed by 19 per cent during the month as the short term effects of the stamp duty deadline rush dissipated, there were one per cent 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. The eurozone crisis has dampened banks’ ability to lend, while the double dip recession is taking its toll on buyer finances,’ said John Bagshaw, corporate services director of Connells Survey & Valuation.

‘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,’ he added.

Remortgaging contributed to the slowing annual growth, with the number of valuations for remortgagors declining by six per cent compared to June 2011, in spite of a 13 pr cent month on month increase. In total, valuations for remortgagors contributed to one fifth of all Connells’ business, the lowest proportion since May 2011.

‘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,’ explained Bagshaw.

He pointed out that the number of home owners on the move played a crucial role in the monthly increase in activity, with 23 per cent more valuations in June than in the previous month, contributing to an annual increase of four per cent.

Buy to let investors also continued to grow annually, with 16 per cent more than in June 2011. Buy to let remortgagors also provided a bright spot for the remortgage market, with 32 per cent more investors seeking to remortgage than a month ago.

‘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,’ Bagshaw added.