Monday, Mar 01, 2010

People are obviously paying off their mortgages with credit cards

Metro: Steep fall in mortgage approvals

"There was also a fall in total mortgage advances, with gross lending sliding to £10.24 billion, down from £13.53 billion in December... But unsecured lending was surprisingly strong during the month, with people borrowing £500 million through credit cards, loans and overdrafts, once repayments were taken into account, the highest level since November 2008..."

Posted by mark wadsworth @ 11:49 AM (1749 views) Add Comment

10 Comments

1. paul said...

Quickly, print more savers' money to recapitalize mortgage lenders. The economy depends on it etc.

Monday, March 1, 2010 12:34PM Report Comment
 

2. little professor said...

Ouch. Just 48,000 mortgage approvals for house purchases in January - down over 10,000 month-on month. I guess the stamp duty holiday ending had a lot to do with that.

But even in December, the number of mortgage approvals for new purchases was still half what it was at the peak - 114,000 mortgage approvals were being made each month in the summer of 07, just before the storm hit, and only 58,000 in December 2009.

Monday, March 1, 2010 12:45PM Report Comment
 

3. luckyjim said...

On the other hand the figure is still higher than the 2009 average and more than 50% higher than January last year.

Lies, damned lies etc.

Monday, March 1, 2010 02:36PM Report Comment
 

4. dill said...

The surprising thing about all this, is what it says about the cash/partially mortgaged who are buying more 'prime' property. They're either overpaying simpy because they can, or they're overpaying because they enjoy the cut and thrust of competition for a few 'prime' properties (because they can), or they're wealthy foreign investors enjoying the benefit of sterling devaluation (because they can), or they're just plain stupid. There's little doubt that the top end of the market has temporarily delayed an overall slide by outward price seepage from London/SE to the provinces. But all the economic fundamentals, combined with ongoing credit constriction, are set to turn the market 180 degrees as the pressure grows. Interest rates forced up to defend an isolated pound, allied to public sector cutbacks (unemployment) will contribute to the bottom end of the market pricing the top. Cash is running out (outflowing elsewhere). There's no way back. The poorer. but responsible, members of our nation may yet have the last laugh. The cash/partially mortgaged are destined to lose a lot of notional wealth. A perverse unplanned redistribution of that wealth. Or is it?

Monday, March 1, 2010 02:37PM Report Comment
 

5. little professor said...

From This Is Money-
The Rise and Fall of Remortgages



The graph starts in the early days of the decade-long property boom, as house prices began to rise substantially the number of people refinancing their mortgages exploded.

Lenders' increasing willingness to offer bargain basement rates over short periods of time helped fuel the boom in remortgaging, which was indulged not only by those trying to keep on top of the cheapest rates for their existing mortgages but also pull more cash out of their property's rising value.

Now, remortgaging is back where it started. And this has a substantial knock-on effect on the economy as a whole. All that remortgage cash was ploughed into extensions, cars, buy-to-let properties, homes abroad, holidays, kitchens, big TVs, small businesses, and just about anything else you can think of.

It all swilled around the economy, with the tide of cash helping to keep things bobbing along nicely.

The current thinking is that remortgages are so far down currently because cuts in the base rate mean many standard variable rates (which most mortgage deals revert to after initial fixed or tracker deal periods) are very low. Meanwhile, lenders are demanding larger deposits or equity for good remortgage deals, just as many homeowners have seen properties fall in value.

The theory is that once that situation ends, the line will be on its way back up to where it sat for the best part of a decade.

But I'm not so sure this will happen. I think a lot of the reason that the line was up there was down to an exceptional credit bubble*. This was a period of huge mortgage credit expansion that isn't going to happen again. That's the supply side.

Furthermore, there's a demand problem. I also think there's a fairly hefty element of people having decided that now might be the time to stop living on the never never and give treating the house as a cash machine a bit of a rest.

So we shouldn't expect all those other things that rode that wave of credit to return to business as normal either - because that wasn't necessarily business as normal.

Monday, March 1, 2010 03:25PM Report Comment
 

6. titaniccaptain said...

This is beginning to look like a cash only scenario is around the corner.

Monday, March 1, 2010 04:19PM Report Comment
 

7. enuii said...

Strange how the graph exactly covers New Labours reign of power.

Monday, March 1, 2010 04:46PM Report Comment
 

8. tenyearstogetmymoneyback said...

Mark said "People are obviously paying off their mortgages with credit cards"

It makes sense. Although the card companies can get a charging order it makes it more difficult to repossess than if they already have the deeds.

enuii said "Strange how the graph exactly covers New Labours reign of power"

It would be interesting to see the previous ten years. I reckon it would be a straight line or possibly even negative.
Strangely it is very difficult to do equity withdrawl when you are in negative equity. Who is to guess what the next
ten years will be like. It could be flat again or exponential (and £100 for a gallon of petrol).

Monday, March 1, 2010 07:49PM Report Comment
 

9. greenshootsandleaves said...

May help to explain this little gem found on rightmove, a bungalow in Hythe (Hants) with an asking price of £267,500:

***RE-AVAILABLE TO PROCEEDABLE BUYERS ONLY***

Or as Kenneth Williams used to say: "gnaah ...Stop messing about!"

Monday, March 1, 2010 09:15PM Report Comment
 

10. This comment has been removed as it was found to be in breach of our Blog Policies.

 

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