Housing Market Chains Grow Despite MMR Slowdown
Lloyd Davies of the Conveyancing Association executive committee and managing director at Convey Law looks at the impact the Mortgage Market Review has had since April.
The most recent property transaction figures from the Office of National Statistics show good growth year-on-year which is certainly indicative of market activity in 2014 to date.
A recent poll of the executive committee of the Conveyancing Association, which is made up of the top 50 conveyancing lawyers in the UK, indicated that most major conveyancing firms had enjoyed record figures throughout the course of this year.
December 2013 finished very strongly with many recording some of the largest completion numbers since 2007. The spring saw the usual upturn in instructions which led to further record instructions this year, with transaction figures looking promising.
While transactional completion numbers are likely to remain high in August, we can expect to see these begin to dip, come September. Residential property transactions take between eight and 12 weeks to complete from the sale being agreed to clients moving house.
Throughout June, July and August there has certainly been a cooling of the market in terms of new sales agreed, which means that the number of transactions completing will dip in September, October and November – however we envisage a seasonal resurgence in property sales during the autumn, once the summer holidays come to an end.
Over the last three months, we believe that new property instruction figures have been down by around 10-13%. There are a number of reasons for this – amongst them the introduction of more stringent mortgage application rules in April, alongside a possible rise in interest rates, coupled with the seasonal summer dip in instruction figures.
There is no doubt that the new mortgage rules that came into effect in April have had a significant impact on a number of transactions being processed throughout the summer months. The new rules have placed greater responsibility on mortgage lenders to ensure that property buyers can afford to borrow.
We believe that certain buyer borrowers refrained from making mortgage applications throughout this period, in order to ensure that they had their finances in order, prior to approaching mortgage lenders for funding, hence the decline in instructions.
Other buyer borrowers were declined or found it difficult to secure mortgage funding as a result of the new rules. It appears by the number of mortgage products on the market – fuelled by inexpensive cost of banks and building societies borrowing money – that mortgage lenders once again have an appetite to make money through the housing industry.
This is not to say that the slowdown is permanent. People recognise that now is a good time to sell and our figures show that related sale and purchase transactions are up a third, indicating that families are beginning to move home after many years where single transactions were prevalent. We are therefore beginning to see an increase in transaction chains where multiple property transactions are interdependent on one another.
These are sure signs that the economy is on the move again. Following the end of the financial world in 2007, house prices plummeted meaning that existing homeowners found it difficult to move property. We have seen a steady increase in property prices over the last few years and we believe that we are now seeing families moving house again as they are able to upsize or downsize to suit their requirements. This shows the property market is moving more easily.
All of these factors suggest that the UK property market is set for a strong come-back this autumn. House prices are increasing with a return to strong figures in the run up to Christmas and beyond. We do not envisage that interest rates will rise until approximately April or May of next year at the earliest.
Given the economic situation of the last eight years, now is not the time to be panicking in relation to inflation or house prices. Consumers need cash to keep the economy growing and that should be the focus of the government and the Bank of England moving into next year.