Homebuyers are Starting to Slow

House buying study

The latest figures show that borrowers appetite for home loans has decreased by 5% from 19.7bn to 18.6bn in August. The seasonally-adjusted figure had been flat since the beginning of the year and experts believe this is leading to a property market plateau.

The market gradual slow down comes despite gross mortgage lending is 13% higher than last year (£16.4 billion) and the highest since August 2008 (£19.3bn). However, August numbers are rocketed due to the late spring mortgage applications that were not given the green light until late summer due to the stricter lending rules.

The Mortgage Market Review (MMR), introduced in April, has slowed down the mortgage lending process as lenders have been navigating the tighter criteria including future interest rate stress testing. The MMR was introduced in response to the escalating reckless lending practice, which were a primary factor in the last housing market crash.

The higher than usual August figure is also accelerated by record house price growth in the South East and London and a higher number of cash buyers. Data shows that wealthy domestic buyers, international investors and the trusty bank of mum and dad pay 37% of all property transactions with cash. The generous grandparents and parents of the baby boomer generation are starting to downsize and gift their homes to help their children get a foot on the property ladder. This is driving up house values because those who would not otherwise be able to afford property with a high price tag are securing a high equity property.

The stretched house prices, tighter lending regulations, and the prospect of rising interest rates is resulting in the gradual slow down of lending activity and buyer interest. And this is a strong indicator that house prices could finally start to fall.

However, while lending and house prices’ starting to fall is seemingly good news considering the environment of the property market over the past few years, its not good news for everyone. The house market recovery has been patchy. While some areas such as London and the South East have been full speed ahead, other areas such as the North West have been stalling out in first gear. Furthermore, the very top of the London market is starting to hit the breaks because of the strong sterling pound.

The housing market recovery is still in full swing according to Richard Sexton, director of E surv chartered surveyor, but the slow down in homebuyers and lending should result in more affordable housing prices and a more balanced market. But the deceleration won’t be celebrated in the regions that are stuck at a standstill.

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