World Cup fever could slow buying activity

Hamptons Mortgages says home buying hit an annual high in May, but warns England’s progress in the World Cup could slow buying activity.

The number of new business cases almost doubled from 150 in May 2005 to over 300 in this May, and accounted for 50.68% of new business at Hamptons.

But remortgages remain popular, with owners cashing in on the rise in house prices. Figures from the Department for Communities and Local Government show that house prices rose by 5.1% from 186,000 in March to 188,000 in April.

Hamptons says LTVs have also risen on all types of mortgages, as borrowers need to borrow a larger proportion of a property’s value. This fits with the Council of Mortgage Lenders revising its property price inflation estimate from 2% to 7% for 2006.

Jonathan Cornell, director at Hamptons, says: “World Cup fever hit the market early and we have seen home buying at an annual high, accounting for over half of all new business.

“We expect to see a slowdown over the next few weeks as viewing levels plummet but we cross our fingers for an England victory and the resulting boom in the property market as people capitalise on the feel-good factor.”

Research from the Council of Mortgage Lenders last week revealed that fixed rate mortgages accounted for 71% of all house purchase loans and remortgages in April. This figure is 2% higher than in March, and 17% higher than in April 2005.

But Cornell says increasing nervousness about short-term rates could mean a sharp decline in two-year fixed business next month as customers fix their rates for longer.

Mortgages Direct has also seen record numbers of borrowers opting for long-term fixed rate deals as buyers fear rates will not only rise imminently but continue to escalate over the next five years.

Peter Gladdy, director of Mortgages Direct, says: “More borrowers are weighing the benefits of cheaper rates against long-term security.”