Housing market activity has decreased by 12 per cent in the 12 months to September due to buyers and sellers factoring in higher interest rate predictions while the new loan-to-income caps are set to come in next month, surveying firm Connells said.
Despite valuation activity last month up by 42 per cent since August, housing market activity still decreased, according to Connells Survey and Valuation.
John Bagshaw, corporate services director of Connells Survey and Valuation, said that higher interest rates are nearing, while caps on mortgage to income ratios will come into force next month, following the Mortgage Market Review settling in.
Earlier this month, the Prudential Regulation Authority said that lenders must ensure that higher loan-to-income multiples of 4.5x do not make up more than 15 per cent of their mortgage book, however this does not apply to smaller lenders that advance less than 300 mortgages a year.
“In the property market, buyers and sellers are increasingly factoring in slightly higher interest costs and a potential slowdown in house price growth.”
Furthermore, after growing by 7.8 per cent this year, the Centre for Economics and Business Research predicted average UK house prices will dip by 0.8 per cent next year.
Mr Bagshaw noted that steadier progress is not necessarily bad news.
“Autumn last year was exceptionally good for housing market activity. Now, as the UK searches for a long-lost measure of normality, the housing market is displaying sensible levels of caution; a healthy and often life-preserving characteristic.”
Remortgaging was the strongest performing of all sections of the housing market in September. Compared to August, remortgaging activity was up 57 per cent, leaving remortgaging valuations down 9 per cent since September 2013, the smallest annual fall.
First-time buyers saw the second fastest monthly pick-up in activity since August, increasing 39 per cent on a monthly basis, while annually first-time buyer activity was down 13 per cent.
Connells found that things were more muted for owner-occupiers moving home up the property ladder, with such home mover activity up 32 per cent compared to August. However, on an annual basis the number of home mover valuations saw the same 13 per cent drop as first time buyers since September 2013.
Mr Bagshaw added: “Alongside this sheer number of potential home-owners, lenders are increasingly playing their part; even more willing to back new buyers, partly thanks to help to buy.
“The overall result is a consistent buoyancy for first time buyer valuations above more muted activity further up the chain.”
Buy-to-let saw the greatest annual drop in activity, down 15 per cent compared to September last year, despite a month-on-month growth in the number of valuations for buy to let purposes of 38 per cent.
peter.walker@ft.com
