House purchase lending fell 7% in March – the third consecutive monthly fall, which could mean the property market has gone into reverse gear.
This prediction has come from national surveying firm, e.surv, part of LSL, using its own data.
The firm has a strong record in accurately predicting formal market data from the Bank of England, although its latest report is in conflict with one from Strutt & Parker and a forecast from the Item Club (see separate story).
However, according to another firm of surveyors, Connells, valuations activity picked up to levels not seen since March 2007.
According to e.surv, house purchase approvals fell from 51,653 in February to 48,200 – their lowest since August 2012.
February’s figure was down on January’s, and January’s was down on the 55,266 figure of December.
Last year, there were five consecutive months of increases in house purchase lending between July and December.
There were 5% fewer purchase approvals than March last year.
If the e.surv forecast is correct, it will have been the first time since 2008 that house purchase lending has fallen between a February and a March.
Richard Sexton, director of e.surv chartered surveyors, explains: “The mortgage market is beginning to regress. It ended last year very strongly – with five consecutive months of increasing house purchase lending and more loans to first-time buyers – but lending has fallen during every month in 2013. One month could be a blip. Two months could be coincidence. But three consecutive months of falls in house purchase lending indicates the market has gone into reverse gear.”
He said approvals declined for two reasons. First, appetite for moving home has fallen thanks to a combination of high inflation, weak growth of wages and rising house prices. Secondly, tough lending criteria are preventing many potential borrowers from qualifying for their desired mortgage – despite record low rates and a wider choice of mortgages.
The fall in lending in March was spread proportionally across all LTV brackets, although lending to borrowers with a small deposit accounted for 12% of all house purchase loans in March, up from 10% in March last year.
The average LTV rose to 61.4%, the highest for 14 months.
Demand fell considerably among low LTV borrowers in March. Lending to borrowers with a deposit of 40% or more fell to the lowest level since January 2012, indicating that wealthier borrowers are content to sit tight and wait for the economy to improve.
As total approvals fell, so too did the number of approvals on typical first-time buyer properties under the value of £125,000. There were 11,568 approvals on properties up to the value of £125,000 in March, down 3% from 11,880 in February, and down 7% from 12,463 in January.
Even London hasn’t been immune to the downturn over the first quarter of this year, with approvals 22% lower than last year – far greater than the nationwide fall of 5%.
However, according to figures from Connells Survey & Valuation, valuations activity picked up to levels not seen since March 2007.
The overall increase of 29% compared with February was almost entirely fuelled by a very sharp rise in buy-to-let valuations.
The Connells data measures only the number of valuations, not mortgage approvals.
According to Connells, valuation activity has grown for six consecutive months – which, taken in conjunction with e.surv’s forecasts of lending, suggests that a growing number of mortgage applications are being rejected.
Valuations for first-time buyers bounced 26% compared with February, and for home movers was up 28%. Remortgaging grew 25%.
However, buy-to-let valuations activity grew by an astonishing 45% on February’s figure.
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