MMR has impacted on the appetite for lending and also the number of would-be buyers applying for a mortgage. Applications for mortgages have decreased by 6% on the month and 14% annually as the new restrictions take effect. While this has not impacted the number of buyers this month, the levels could begin to curtail next month.
The number of first-time buyer applications has also decreased, by 5% on the month and 12% annually. While applications are still higher than they were two years ago, there has certainly been a reduction in applications, in part due to MMR and also potentially because of rising house prices.
The divergence of supply and demand is the primary cause of rising house prices. The number of UK buyers registering increased by 29% annually. The number of new instructions has only increased 6% annually - there is still a severe shortage of properties on the market. While the ratio of new buyers/new instructions has come down marginally on the month, at 6.8/1 it remains the highest in May for over two years.
In London the imbalance is even more acute, with buyer registrations increasing 34% annually but new instructions rising by just 11% annually. As a result there are 13.5 buyers chasing every new instruction, down marginally from 13.7/1 last month but still higher than the previous two years.
The viewings/offers ratio has been decreasing steadily over the last two years. While both the number of viewings and offers have increased, annually by 7% and 17% respectively, the number of times a buyer views a property is decreasing – a symptom of a competitive market. As such the ratio of viewings to offers has dropped to 8.0 viewings to every offer, down from 8.1/1 last month.
In London the market is very much the same, with viewings rising 14% annually, but offers increasing 29%. As a result the ratio has remained at an all-time low of 10.4 viewings for every offer.
David Plumtree, Chief Executive at Sequence, confirmed that prices continue to be bolstered by rising levels of buyer demand, up 29% annually, which is around six times the rate of supply, with new instructions up just 5%.
He said:
"Going forward, a reduction of buyer demand and stabilisation of house price growth is unlikely to happen until later this year, so we urge sellers to make hay while the sun shines by taking advantage of the captive audience of buyers now before the opportunity diminishes. There are now close to seven buyers chasing every new instruction and it is this competition which is keeping prices high and sales transactions rising, up 17% annually.
"While house prices remain robust, up 12% annually across the UK and 1% on month, the mortgage market is shifting and we are seeing a cooling off of the number of mortgage applications, down 14% annually, due to the new Mortgage Market Review recommendations. When mortgage products become less attractive and interest rates eventually rise, we may see an impact on house prices as buyers, especially first time buyers, begin to struggle keeping up with rising costs of buying a home.”
