Purchase approvals have fallen 19% since the start of the year and demand has slowed among home movers for the fourth month in a row.
According to the latest Mortgage Monitor from e.surv, the UK’s largest chartered surveyor, there were 61,202 house purchase approvals in May 2014, 3% lower than in April and the lowest number since 59,260 in June 2013.
However, on an annual basis, May lending is 4% up year-on-year.
Richard Sexton, director of e.surv chartered surveyors, said: “Some buyers are waiting to see if the market will begin to plateau before agreeing to pay the high price tag on new property. And that’s before adding in other moving expenses such as stamp duty.
“MMR triggered the beginning of the slowdown. It took time to integrate the rigorous financial tests into the mortgage application process, and to train staff in the new procedures. But as MMR becomes further bedded down into the lending process, it is having less of an impact.”
However, first-time buyer lending continued to pick up pace, with 85% or above LTV lending up 47% on the previous year, according to LSL figures.
As the market opened out, average Loan to Values have risen from around 55% LTV in November 2008 to 63% LTV today.
Fewer home-owners with equity already built into property are choosing to move, with a 6% drop in home movers with deposits of 40% or over.
However, Sexton said ‘the wind may be changing for first-time buyers’ after RBS followed Lloyds by capping mortgage lending at 4 x income on loans over £500,000.
Richard Sexton, director of e.surv chartered surveyors, said: “The extra measures are designed to reduce the fever in the market, but they may have some negative side-effects. While MMR demands individual investigation into each home-loan application, income multiple methods are a simplistic way of testing borrowers, and may rule out many deserving aspiring home-owners.”
Sexton said with ONS predictions the population in London will top 10m in the next 15 years new homes are needed now.
Meanwhile, Connells is reporting surveyors seeing a bounce back in activity in the market in May up 3% on a monthly basis as of May after a 15% month-on-month fall previously in April.
John Bagshaw, corporate services director of Connells Survey & Valuation, said: “The new rules introduced in April ensure that progress via mortgage lending is sustainable. And that progress continues. Today the property industry is proving it remains on an optimistic trajectory – led by first time buyers.”
Buy-to-let activity has also fallen by 1% on a monthly basis, though this leaves the total number of buy-to-let valuations at levels 11% higher than in May 2013, due to strong growth in the buy-to-let sector previously in the last twelve months.
Remortgaging has recovered from a sharp dip in April, with activity in May up 4% on the previous month. This has boosted annual growth in the number of remortgaging valuations to 5%, in line with the housing market as a whole.
