Strong growth in UK residential property mortgage valuations

Published 09th Nov 2011

Residential mortgage valuation activity in the UK continued its strong annual growth in October, according to the latest Housing Market Activity Report by Connells Survey and Valuation.

The number of valuations conducted during the month grew by 61% in comparison to October last year, despite a monthly dip in activity compared to September.

The total number of valuations conducted during October dropped by 17% on a monthly basis, due to the strong seasonal uplift witnessed in September. However, the monthly decline in October was a much less severe drop of activity than the average decline of 24% usually seen between September and October.

‘Following the flurry of higher LTV deals that hit the market in late summer, most lenders have adopted a more cautious approach given the ongoing concerns over rising unemployment and their exposure to the Eurozone crisis. There may be 90% LTVs on the market, but lending targets are still historically low, limiting the number of buyers and homeowners able to take advantage,’ said John Bagshaw, corporate services director of Connells Survey and Valuation.

‘However, even accounting for the recent dip in lending, it is clear that we are now a long way from the post downturn valuations market. Since 2007, a seasonal drop in activity of nearly a quarter has been the norm at this time of year, but the market performed more robustly than anticipated in October,’ he explained.

Strong activity from investors played a crucial role in the annual growth in valuations figures. During the month, there were 89% more valuations conducted for buy to let investors than in October 2010. It means that buy to let is now responsible for 13% of all valuations Connells conduct, the highest proportion since January.

‘September was a red hot month for buy to let investment, and it continued to outperform the wider market last month too. As demand for rental accommodation has gone from strength to strength, so too has landlords’ appetite for mortgage finance, and this has continued to boost the valuations market. While rents are high, and criteria remain prohibitively strict for the average first-time buyer, the expansion of the private rented sector will continue apace,’ added Bagshaw.

Purchase activity from owner occupiers and first time buyers showed strong annual growth, despite a monthly decline. Although the number of valuations for home movers dropped by 13% in October compared to the previous month, there were still 54% more than a year ago

The number of valuations for first time buyers in October was 43% higher than a year ago, despite a 20% drop compared to September.

‘While there is still concern about the state of the economy and the direction of house prices, the rising cost of renting is making the prospect of homeownership increasingly attractive for first timers, especially given the historically low interest rates,’ said Bagshaw.

‘We anticipate activity to steadily increase in the next few months as first-time buyers look to move before the end of the stamp duty holiday in March,’ he added.

Although remortgaging activity in October dropped compared to September, down 24%, it showed a strong annual rise of 82%.

‘Standard variable rates have plummeted as a result of the record low bank rate, but that has not deterred many from remortgaging. Fixed rates have been bumping along the bottom, and thousands of borrowers have elected for the security of a rate that they know will be affordable for years to come,’ concluded Bagshaw.

Source: ' Property Wire '

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