Thursday, Aug 20, 2009
I really to hate to have to do this, but ...
Metro: Home loans up by a quarter in July
Mortgage lending jumped by 26% during July as the housing market showed further signs of improving, figures have showed.
Around £16 billion was advanced during the month, the highest figure for nine months and up from £12.7 billion in June, according to the Council of Mortgage Lenders. The group said the increase was further evidence of a modest improvement in the market after an exceptionally weak winter. But it cautioned that activity still remained subdued by historic standards, with lending last month the lowest for July since 2001 and well down on the average of £27 billion seen during the past seven years.
Posted by mark wadsworth @ 12:22 PM (2049 views) Add Comment
25 Comments
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1. flashman said...
In City circles, it has been common knowledge that mortgage lending will pick up quite sharply. I have mentioned it several times on this site. It may sound counter -intuitive but a pick up in lending will be very good for the HPC. There is a great deal of pent up supply from divorcees, retirees, down-sizers, up-sizers, and relocations etc. The increase in mortgage lending will facilitate the release of this pent up supply and as most sellers are also buyers, we will achieve much higher volumes in the housing market. Low volume is the only thing holding back the HPC and the reservoir of supply that has been held back by restricted lending and wait and see attitudes, will burst its banks soon.
It is also common knowledge that underwriting standards will still remain strict for the foreseeable future which will, by design, limit house prices to multiples of REAL salaries, so the increased volumes will only serve to fix the currently broken, ‘price discovery’ mechanism. It’s the same in any market
2. quiet guy said...
The CML's press release is a bit more informative.
http://www.cml.org.uk/cml/media/press/2377
It includes an interesting graph that shows lending in 2007 & 2008 versus lebding so far this year.
3. ontheotherhand said...
£16bn in July. Wow! Still got some way to go this year to catch up with the £363bn gross mortgage lending in 2007
4. Watp said...
The government pumped a staggering £13bn of real money into the economy in July as it took less in taxes and paid out more. In this environment it would be amazing if there was not some kind of response. If like me you believe that the next crash will be a sterling crash then it may well be sensible to get out of cash and into something more solid.
I have been watching £ for the last few months and it has been in a holding pattern for the summer. It is going to get interesting in September when investors are back to work and deciding on global allocations of assets.
5. bluebeach said...
Thanks Flashy @ 1... I believe you are right in the fact that prices are being held up only by virtue of too little on the market...keep it up with your views...I like :O)
6. inbreda said...
very true and very well put flashman.
Where I live it is clearly only chains of next-time-buyers that are completing, where little new mortgage lending is required, that are completing successfully. Anything that involves a FTB is dieing. It is clearly the more expensive houses being sold, and the indices do not properly stratify this sampling error out.
7. house said...
Flashman,
I very much hope you are right and agree with what you have said. But just so people on this site know what an estate agent had to say to me just an hour ago when I rang him to make an appointment to view a property. I said to him that I had not heard from him for a while, and knows my views on property, his comment was that the properties are selling as soon as it comes on to the market at just below the 2007 prices, therefore it was a waste of time to contact me. This is in Cornwall. I have not seen a 20% drop here. It is simply unbelievable here. Can you or anyone throw some light on this. This scenario at present is driving me mad as it is against all logical explanations.
Please help to restore my sanity.
8. inbreda said...
@6 house
Ask yourself this. When you wander around cornwall and you see people, some rich, some poor, some middle class... is the one thing that unites them all that they have more money than sense?
9. uncle tom said...
Quite a lot of this borrowing will be from people who are buying a new home while leaving their previous home empty and unsold, seemingly convinced that the market is going to rebound, and that this is the smart thing to do.
Crazy, but true...
10. house said...
@7 inbreda
Yes, I have been saying this to myself for sometime (sometimes with stronger words than you have mentioned), but after awhile you start questioning your sanity ie. by asking yourself who is right and who is wrong. The biggest question I have is, where is the money coming from. Yes lending has increased but is not enough to make a material difference. By the way I am a property owner but I do not think that high living cost is good for the economy as the money is tied up in illiquid assets, if you can call it an asset.
11. flashman said...
house: it is a peculiar aspect of human nature, that we have a tendency to affected by what we are told, no matter what the source. We know that the opinions of agents are self-serving and bombastic but despite this, they can still occasionally dent our confidence.
This estate agent is probably telling a version of the truth. Houses are selling quite well and some of them are achieving great prices but this is due to a historically low supply. I have studied markets for half a lifetime and I have never seen one that will not respond, in the same way, to a such a severe supply shortage. You know what you know, so stick to your guns
12. house said...
@10 flashman
Thank you for response, I will stick to my gun, and your re-assurance helps. Just to say I have experienced the last 4 property crashes but this one appears to be very weird.
Have most people lost all sense of reasoning.
13. mark wadsworth said...
House, I looked in a couple of estate agent's windows when I was on holiday in Cornwall a month ago and it seemed terribly pricey, which is particularly spiteful as it's 99% fields, they could double the developed amount, everybody could live like royalty and have 98% fields instead.
I do have friends who moved to from London to Devon (and back!) who are doing exactly what Uncle Tom says (i.e. renting out Devon 'until market improves').
14. mark wadsworth said...
House, "the last four"? I remember 1973, 1989 and 2007, which other one do you mean? 1979 mini-crash or 1949 crash?
15. bluebeach said...
House... was in Mousehole last week and what a beautiful place it was... had a cottage just on the habour...took a look at St Just also and was not too shocked with the prices considering that you are never far from the coast.. Up here between Wrexham and Chester, we have no such beauty, yet we are near to 2007 prices and things are flying..... Hope you are right Flashy... do you hold get togethers or surgeries so that we can all pray together for an end to this stupidity?
16. crunchy said...
11. house
WHY IS THIS ONE DIFFERENT? There lies the rub and the answer.
We are dealing with a banking crash not a housing crash. Two different engineered animals.
If you can see it from this perspective and draw your conclusion from this point it starts to make more sense.
THE HOUSE ALWAYS WINS!..... WHY? You have a house. You are the majority. A share holder if you like. Adios!
17. house said...
@13 mark
I mean the mini crash in 1979, that is when I bought my first flat in Southampton. I am sorry I do not remember the 1949 crash as I was not born then. Yes, houses in Cornwall are extremely pricey compared to what you get for it. I really feel sorry for my children. I am encouraging them to emigrate when they finish uni.
18. house said...
Also the wages in Cornwall are not that brilliant and good jobs are difficult to find.
19. uncle tom said...
Mark,
Around 1982, house prices were rising, but inflation was rising faster, so in real terms, prices were falling.
Bluebeach,
I've stayed at The Ship in Mousehole several times, pretty at this time of year; and spectacularly wet when the sea gets up in the winter.
I was there at the 25th anniversary of the Penlee lifeboat disaster (which claimed the landlord of The Ship, and seven other crew members)
Very humbling to see the conditions those guys were prepared to set out into...
20. timmy t said...
I was born and bred in Cornwall and still have many family and friends there but I wouldn't go back. Too many rich folk have retired down there, pushing prices through the roof to the extent that locals who don't already own don't stand a chance of ever owning. You're lucky if you can earn more than about 18K there - what can you buy on a sensible multiple of that?
The whole thing will go full circle - a large proportion of the county is already in a right state - such that the rich will no longer see it as a desirable place to retire or have a holiday home and prices will tumble. LVT would sort that.
House - you are right to advise your kids to get out IMO.
21. will said...
I live in Devon and a Proffessor on telly recently said that the West Country was usually the last region where prices dropped. I think the second home owners believe they will not be affected, but the truth is they will eventually have to sell to somebody and even a wealthy person buying another property will expect a discount. Market always wins.
22. tenyearstogetmymoneyback said...
To show what estate agents are like. I had a letter addressed to the householder explaining how Mr & Mrs H
were looking to downsize and urgently needed a property like the one I am in.
The joke is that ever since here I moved three months ago, the same estate agent has had an identical house
(the one that was sold STC and then went back to For Sale) five doors down the road on the market at the price
Mr & Mrs H are prepared to pay.
23. cyril said...
Where I live in SW London the prices are still fairly high but there is very little on the market. My estate agent said their office had only sold 10 houses in a month. I am looking to trade up and I have cash to spend but I can't find anything suitable to buy. The market has ground to a virtual halt here
24. bellwether said...
The idea that increased volume will help prices down is probably sound, although continued constraints met with real need to sell or outright repossesions would have produced price devastation and quickly.
That said I don't see any serious upkick in lending, we are buoyed by market noise just now rather than fundementals. Fundementals are that banks are still hopelessly overleveraged against assets worth less then book.
Put another way if banks issue too much debt, it is not only prices that are discovered the banks themselves are found out as they will have to write off debt. It's pretty much like the gun scence in reservior dogs. It can only end badly.
25. Gmariner said...
I think cause and effect are getting a bit muddled here guys. The supply is being restricted as sellers are not willing or able to drop prices any lower. The vast majority of sales are voluntary, not forced, and sellers appear to have said on mass we won't (or can't) go any lower.
As credit continues to become more available we may see more people able to buy. However, this will not force prices down neccessarily unless sellers decide they are willing to accept less. This seems unlikely as lower interest rates and government intervention are minimising repos.