April saw valuations activity drop by 15% compared to March, as the long-anticipated Mortgage Market Review rules came into force on 26th April. This month-on-month fall leaves the total number of property valuations for all purposes at the same level as was seen exactly one year ago, in April 2013.
However this 0% annual change in April activity represents a stabilisation of the housing market, following March’s 10% annual fall in the total number of valuations.
John Bagshaw, corporate services director of Connells Survey & Valuation, said: “The housing market is undergoing a temporary correction as lenders move to enforce stringent new affordability rules.
“This has fed through into valuations activity – both as volumes feeding through the system have dipped, and as the mortgage application process now takes longer in each case.
“However, despite the monthly dip in activity, the number of valuations carried out in April was still level with the same month in 2007.
“When new regulations come into play we would expect a transition period associated with the switch to new processes. But over the course of the year, valuations levels will recover, leading to a healthier and more sustainable housing market overall.
“Demand for all sorts of property remains extremely high, while lenders remain willing to expand their balance sheets.”
In spite of the overall correction, first time buyer activity remains 3% above this point last year. Meanwhile on a monthly basis the number of valuations on behalf of first time buyers saw the least dramatic dip alongside established home movers, down 13% from March.
By contrast, due to slower growth in previous months, this 13% monthly dip for established home movers leaves such activity down on an annual basis. The number of valuations carried out on behalf of home movers in April is 1% lower than in April 2013.
Bagshaw added: “In the last twelve months the prospects for first-time buyers have changed dramatically, and the latest rules have not changed that.
“The availability of high loan to value loans has expanded enormously in the last year – and a careful approach to affordability will actually support this further.
“For both new and established home movers, the MMR will support the fundamental affordability of housing over the long-term. Teething problems are a price worth paying and are almost completely temporary.”
The fastest monthly drop was seen in the number of buy-to-let valuations, down 19% compared to March. In spite of this, the level of buy-to-let activity remains 5% ahead of April 2013, the most positive sector on an annual basis.
Remortgaging saw a similar trend compared to March, down by 18%. However this brings the number of remortgaging valuations to levels 5% below April last year.
Bagshaw said: “Remortgaging work has seen a sharper dip than average for two main reasons. Firstly this work is the most affected by the new rules, requiring much more scrutiny than remortgaging before the MMR. But secondly there is a slightly more persistent trend; most mortgage rates are now about as low as they will feasibly get, and the monthly gain from moving to a cheaper deal has already been pocketed for an increasing proportion of households.”