Thursday, Mar 01, 2007
'New' mortgage business practically non existent
Firstrung: Eighty percent of new mortgage business is remortgaging - BOE
The latest BOE report confirms that mortgage lending is still on the increase, allbeit at a lesser rate. However, what is noticeable from the information provided is that approx. 80% of mortgage lending transactions are now re-mortgages - 104,000 loans from 120,000. The putitonthemortgage.com spenders show no signs of self control. Are UK consumers maintaining a 'spending binge' by simply using their homes as cash machines?...
Posted by converted lurker @ 12:26 PM (161 views) Add Comment
14 Comments
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1. sold 2 rent 1 said...
Nice find converted lurker,
This shows that we are living on borrowed time.
I can't wait for the quarterly report by Edmund Conway, Economics Editor at The Telegraph, on the Lombard Street Research LSR "housing affordability" index.
It should be out at the beginning of April and if we have an IR rise in March then it will be plummeting down big-time
The last 2 articles were published on 3 Oct 2006 and 3 Jan 2007
http://www.telegraph.co.uk/money/main.jhtml?xml=/money/2006/10/02/cnhouse02.xml
http://www.telegraph.co.uk/news/main.jhtml?xml=/news/2007/01/02/nhomes02.xml
For all you bulls that need convincing that the market is nearing its peak. LSR are the most reliable HP predictors in the business.
2. sovietuk said...
"80% are remortgages". Just a minute, what's going on here? Isn't this really quite significant? Dosen't that mean that a huge number of these people are essentially broke or are either just enjoying an unaffordable binge? Either way the day of dreadful reckoning is moving ominously closer.
3. Countdown2007 said...
I am not surprised about the 80% figure but I wonder if the remaining 20% of Mortgage borrowers are first time buyers mainly made up from recent divorcees which are back on the market. Surely there can only be a fraction of "real" first time buyers...
4. talking rot said...
Until now I was not convinced that re-mortgaging to finance a luxury life style was going to ba a major part of problem for many people. I couldn't believe that so many "normal" people would be increasing their mortgage. It beggars belief. Borrow £10,000 on a load to buy a car and pay £17,000 due to interest. But borrow £10,000 by adding £10,000 to your mortgage and you end up paying £30,000 back.
Re-mortgaging could be a made part of the problem afterall. Should the benign interest rate situation ever change (and personally I'm not sure we'll ever get to the 8% or 9% needed for a crash), these people will suffer.
5. Jimmyjames said...
I've think Firstrung have misread the fine print:
"The numbers of loans approved for house purchase (120,000), remortgaging (104,000) and other purposes (81,000) were all higher than in December."
That means remortgaging is closer to 33% (or thereabouts) of the grand total
6. Wotsthatcomingoverthehill said...
It is possible that the people re-mortgaging are simply shopping for a better deal and not increasing the amount owed. I guess as rates rise and people start to see their out goings increase more people will seek an improved deal away from their exsisting borrower.
However I guess it is easy at that point to be tempted into getting that little bit extra to keep up with the Jones.
I was beginning to think that my decision to sell and rent for a bit was an error but since the New Year I have started to believe again
7. Steve1 said...
I am still amazed how people are duped by this cashback scam. In other words paying more for the same house. Unbelievable. You would not go back to Tesco three years after buying a tin of beans and giving them more money for a few extra magic ones. Normally come in packets of 5.
8. harold said...
80%!!! you're joking - surely?!! Just goes to show that the rosy HPI picture must largely be a London bonus effect. "Never trust a mean", as they say at statistaholics anonymous.
9. Njp said...
The figures say:
House purchase (120,000), remortgaging (104,000) and other purposes (81,000)
That's 39%, not 80%.
10. tyrellcorporation said...
A great statistic CL and one we've all suspected but never seen.
If 80% of mortgages are re-mortgages/Mortgage-Equity-Withdrawal. Buy-to-let accounts for approx 10-15% of the market so that leaves about 5-10% First-Time-Buyer activity. Most Vested Interest group spin would have you believe that the FTB market is booming still at about 35% of the market - utter crap!
The market has detached itself from its lungs - it's living anaerobically, how long can it survive?
11. C'mon Correction said...
The debt in this country is reaching a different realm. New Labour don't seem bothered by it at all, they will ride the economy until it hits the wall. People aren't getting the message - the tool is further rate hikes until it all goes into reverse. Also if the Yen carry trade un-winds - watch out.
12. Popalot said...
...and almost nobody is moving "up" and adding to their mortgage in the normal way.... Stamp duty, fear of the top.....ouch this is a Pete Tong situation and I suspect Merv will be wincing to himself because he has suspected it all along.....
13. Pedagog said...
Don 't assume though that all the remortgagees are mew-ing. Many will simply be switching the same mortgage amount at the end of a fixed term deal to a new provider with a special deal for switchers.
Okay so many are probably mew-ing too! But we don't know how much of the 80% this is.
What is more significant is that only 20% is new business. Is this just because people are wiser these days and most shop around for a new mortgage provider every couple of years when their fixed term deal ends? Or is it because the market is depressed/stagnating? Unfortunately the market doesn't seem depressed.
14. sirgoogle said...
It is true the madness is everywhere. Otherwise sensible people are MEWing.
I met Post-mistress last week in the West Country and she mentioned that she had brought her council house in the last boom (18K), had nearly finished her mortgage, but was now usuing it as a cash-machine to buy cars and go on holiday (expensive ones). Her mortgage is now ...wait for it.. 60K. She did not see the problemand thinks that IRs will not go up much more (if at all). Maybe she is right ..... but why create a long term debt when its not needed.