Analysis: As property sales surge 20%, how long can the recovery last?

The seasonally adjusted numbers from HMRC, published today (October 21), include only those residential properties sold for more than £40,000, but they reflect the pent-up demand released during the past two months, and how buyers are rushing to make stamp duty savings.

A bounce back has come despite the mass withdrawal of 90% LTV mortgages and tight credit criteria on some of those products left.

John Phillips, national operations director at Just Mortgages and Spicerhaart, said: “It is a fantastic time to be a mortgage broker. We saw record numbers of applications and exchanges in September.

“The one downside has been the lack of lenders offering high LTV mortgages. There are still thousands of clients with 10% deposits who are safe investments and they are currently being blocked.

“The market needs a steady supply of these products to support current applicants. Brokers are not concerned about service level agreements being stretched, delivering for the client is more important, timing is not the issue. If lenders can fix that, we expect the demand to continue for the rest of 2020.”

John Goodall, chief executive of specialist buy-to-let lender, Landbay said: “The market both in buy-to-let and in residential is much more buoyant than any of us expected back in May.

“We are seeing many landlords anticipating an increase in rental demand as it gets harder for people to get on the property ladder due to increasing unemployment and the reduction in high LTV mortgages.”

Richard Pike, director at Phoebus Software which works with many mortgage lenders, said: “The demand is clearly affecting house prices which are starting to rise quite sharply.

“According to a study by Rightmove, the average price of a property coming to market rose by 1.1% in the last month. It is likely that pricing has been boosted by borrowers moving to more ‘Covid friendly’ housing options, as people are willing to pay more for properties that reflect their ideal requirements as a result of lockdowns.”

Pike believes upward pressure on prices might also be due to existing homeowners who can either afford to put down larger deposits, and therefore avoid the rush of the one-day 90% LTV sales, or who can afford to offer above asking prices.

“As we look forward, house prices should remain strong for the six months to 31 March 2021”, he added.

The sustainability of the mortgage market’s recovery will be explored in various sessions across the Lending Summit in 16 and 17 November, as well as digital broadcast sessions during FSE-Week, for lenders and intermediaries, from 9-11 November.