Boe Mortgage Approvals: 38k

[leveller]

This doesn't sound like an improvement to me. The total amount of mortgage funds available has shrunk. Spin that.

Nice graph, less money being progressively lent out, the amount of people being lent to is beside the point.

It can't be spun, it will be ignored by HPI VI's.

[drrayjo]

You're probably right, but I do recall seeing a chart on someones website that showed the levels of transactions required to stabilise house prices reducing the lower prices get. Can't recall the website address, but he's apparently a regular poster here and theres also some links to spread betting on prices? I think from memory the chart showed current levels would need to be about 55K per month to stabilise prices, but I could be wrong on that.

What kind of veteran doesn't know Spline's website?

We've been at this for year's lads, keep (Hamish + Rhinitis), it was Spline's work that turned many bearish!

What you are basically pointing out by quoting Spline is that a 35% overall fall is baked in SO FAR in all probability, and that a meaningful recovery (i.e. a return to growth) is at least 2 years away.

http://www.houseprices.uk.net/articles/hou...rice_predictor/

[FreeTrader]

do you think for deleveraging to start in earnest will be dependent on economic circumstances going forward i.e unemployment rates ? Also do you see the signs of the debt burden actually increasing despite lower interest rates as classic symptoms of debt deflation as described by some notable economists ?

i'm somewhat disbeleiving of the idea that all we need is for a increase in approvals to affect house price stabilisation. Even though the graphs/data might point to that, i just can't help feeling it's another one of those charts that ignores the monstrous household debt burden. Surely we have to develerage we can't roll over the debt any more or solve debt with resumption of previous credit lines and low ir's.

What I see at the moment is a reluctance to take on more debt combined with an inability to access debt. However we've not yet seen the need from households (in total) to actually pay down debt. Partly this is because lower interest rates have cushioned the pain, partly it's because households haven't yet accepted that living standards need to permanently drop, and lastly, some households simply can't afford to reduce their debt.

There have been a few articles recently suggesting that the household saving ratio is increasing (up to around 4%, still a long way from where it was in the 90's recession) and we may soon see signs that debt levels are starting to be reduced. It's becoming apparent that relief for debtors is reaching its limits. Interest rates cannot be reduced further, there's nothing left in the government coffers, and printing money to devalue debt in real terms will be resisted by the bond and currency markets. So, borrowers will soon realise that there is nothing but pain ahead, and that's when the desire to pay down debt takes hold and the personal bankruptcies begin in earnest. Once this deleveraging becomes endemic (which based on the aftermath of past credit booms I believe it will) then it's very difficult for monetary policy to combat the sort of debt deflation that Fisher first theorized about in the 1930's.

In my view deleveraging is a necessary consequence of the credit boom, but the politicians and economists don't seem to see it this way. Their view is that we need to stabilise the credit markets, and then we can continue to grow the economy with the sort of credit-fuelled spending we've seen in the past decade.

Re the mortgage approval numbers: I'm not sure why there's such a debate on this. As house prices fall then at some point demand will naturally rise, no? Is everyone expecting prices to drop 40% and suddenly approvals jump from 32K to 90K?

[Alfie Moon]

Why not read the hometrack report. If monthly falls in january are 1%, February 0.8% and March 0.6% then that is a distinct trend.

You said that transactions are still at record lows, but they have increased steadily for the past 4 months. BBA transactions are up 57% from November to date.

Rinoa, you are relying on a single source .... try looking at the data coming from the wider pool of data and measures of the housing market and your little 'straw' that you are trying to clasp on to so tightly slips away. Also you haven't addressed the BoE stats and what that reveals about mortgage lending - downwards it goes and completely undermines your reading of the mortgage approvals data. Trends, however, do have up and downs and occasionally lulls .... doesn't mean the trend is broken. You are simply clasping at a couple of statistical straws and ignoring the vast majority of the available data, and indeed the current and coming economic storm/hurricane that is and will continue to suck house prices down.

[Namaste]

Very Interesting stats here:

http://www.bankofengland.co.uk/statistics/.../Feb/tablec.xls

Approvals:

Feb 08: 68000

Mar 08: 60000

Apr 08: 54000

May 08: 40000

Halifax HPI:

Feb 08: -0.3%

Mar 08: -2.5%

Apr 08: -1.3%

May 08: -2.4%

Nationwide HPI:

Feb 08: -0.5%

Mar 08: -0.6%

Apr 08: -1.1%

May 08: -2.5%

Clearly this is the busiest time of year for house purchases, but we only have half of the approvals we had 1 year ago. And even then house prices were falling, so they're definitely still falling now.

[drrayjo]

What I see at the moment is a reluctance to take on more debt combined with an inability to access debt. However we've not yet seen the need from households (in total) to actually pay down debt. Partly this is because lower interest rates have cushioned the pain, partly it's because households haven't yet accepted that living standards need to permanently drop, and lastly, some households simply can't afford to reduce their debt.

There have been a few articles recently suggesting that the household saving ratio is increasing (up to around 4%, still a long way from where it was in the 90's recession) and we may soon see signs that debt levels are starting to be reduced. It's becoming apparent that relief for debtors is reaching its limits. Interest rates cannot be reduced further, there's nothing left in the government coffers, and printing money to devalue debt in real terms will be resisted by the bond and currency markets. So, borrowers will soon realise that there is nothing but pain ahead, and that's when the desire to pay down debt takes hold and the personal bankruptcies begin in earnest. Once this deleveraging becomes endemic (which based on the aftermath of past credit booms I believe it will) then it's very difficult for monetary policy to combat the sort of debt deflation that Fisher first theorized about in the 1930's.

In my view deleveraging is a necessary consequence of the credit boom, but the politicians and economists don't seem to see it this way. Their view is that we need to stabilise the credit markets, and then we can continue to grow the economy with the sort of credit-fuelled spending we've seen in the past decade.

Re the mortgage approval numbers: I'm not sure why there's such a debate on this. As house prices fall then at some point demand will naturally rise, no? Is everyone expecting prices to drop 40% and suddenly approvals jump from 32K to 90K?

Great post

[the end is a bit nigher]

Interest rates will increase. But if lenders are offering 5 year fixes at 3.99% then the market is anticipating only very modest increases over that timescale.

Who is doing 4.99% for 5 years please?

[Rinoa]

The banks made have made more approvals for loans, but the actual net total amount they lent reduced last month. i.e. more people repaid capital than the banks lent out in new loans.

This doesn't sound like an improvement to me. The total amount of mortgage funds available has shrunk. Spin that.

The data you show is for net lending. This is the amount they have lent out minus the debt that has been repaid. It doesn't reveal gross lending.

If more money is coming back into the banks this is a good sign as it is then available to be lent out again.

[twatmangle]

Who is doing 4.99% for 5 years please?

I was offered 3.99% for 5 years by Woolwich last month.

Also the Post Office were doing 5 and 7 year fixes in the 4-5% range.

Try this: Comparative Tables.

[Rinoa]

Who is doing 4.99% for 5 years please?

Abbey and HSBC and probably many more all do 3.99% 5 year fixed rates.

[Guest DissipatedYouthIsValuable]

Abbey and HSBC and probably many more all do 3.99% 5 year fixed rates.

Go and buy a few more then.

[Prof]

First, you're an idiot..

Second, your maths are wrong. The gross interest is too high. You haven't allowed for tax on the interest. Delayed purchase is just that, delayed. The transactional costs will have to be paid at some point anyway, so including them is absurd. If you want to get pedantic I could make the example for STR, in which case I could include two sets of transactional costs, HIP costs, moving expenses (twice), etc, easily adding 10K to the equation in my favour.

This is now the third thread you've tried to troll me about the signature, and your only argument against it is....

But if someone hadn't bought a house then maybe they could have made some money somewhere else.

Yeah, possibly, but they could also have put it all in the stock market and lost 50%!!!!!!

Neither of which is relevant to the actual loss/gain on the actual transaction stated. What someone might or might not have done with money instead is irrelevant.

But feel free to continue making yourself look stupid.

Not trying to "troll" you, just trying to correct some fundamental errors in your maths.

"You haven`t allowed for tax on the interest" is a feeble attempt to dismiss me as an "idiot", but if anyone is proving they are an idiot with a poor grasp of simple maths, it`s you.

Here`s my calculations, please do tell if I`ve got this wrong.....

(Please allow for approximate figures).

Cash paid for house £160,000.

Rental over 2 years = £20,000.

Balance kept in savings accounts (assuming that the rental was paid up front) = £140,000

Average interest rate from Jan 07 to Jan 09 4% (I have been getting more than this on average, but I`m being "fair").

So, let`s say that you actually receive 3.5%, after tax, on £140K. I make that about £10K.

Did I ever say that someone could have made some money elsewhere ? All I have said is that you either forgot, or chose to ignore the interest on the money that could have been gained over the two years of home ownership.

Also, you say "Neither of which is relevant to the actual loss/gain on the actual transaction stated. What someone might or might not have done with money instead is irrelevant."

Would you say that the £10K interest (which you claim is incorrect, but I`d say I`ve got that right) and the costs of buying are irrelevant ? Yes, some people may have put £140K into the stock market, but let`s be reasonable and assume that a majority would have "played it safe" and kept it in savings accounts. I know I would have.

If your calculations had been more like mine, then I would have to agree with your statement, but I think you might just be trying to "embelish" a bit of good news.

BTW. I`m still averaging around 5% NET on my savings, not bad for an "idiot". It`s just a pity I didn`t invest in an Aberdeen property.

[CharlieChuck]

The data you show is for net lending. This is the amount they have lent out minus the debt that has been repaid. It doesn't reveal gross lending.

If more money is coming back into the banks this is a good sign as it is then available to be lent out again.

Gross lending is irrelevant. It's one half of the story. The other half of the story is where does the money come from to lend out.

At the moment the only lending being made is from repayment of capital from other people's mortgages. In fact it's even less than that, less than zero in fact.

Tell me, what will happen if an additional 100,000 houses are sold each month and there is no extra total money available to bid for them. The price of those houses sold will have to fall.

Higher approvals with no extra money is a very bad sign for you housing bulls.

[ParticleMan]

If more money is coming back into the banks this is a good sign as it is then available to be lent out again.

Is it?

Good, someone tell the Treasury; no need to prop up RBS after all.

Better tell the Saudis too.

They'll be quite relieved to be putting a floor under their losses in BARC.

(I'd mutter something about the impact on bank balance sheets of early repayments by fearful borrowers, but what's the point? Look how Cassandra wound up)

[Valerius]

Last month's set of data was dismissed here as a blip.

It looks like we are deeply in the recovery phase now. Mortgage approvals will rise further, boosted by the available of credit. Get over it.

The billions the government had set aside to lend to consumers are now filtering throught the mortgage chain

More houses are exchanging hands, sun is shinning, spring bounce is definitely in the air.

This sure will put the brakes on HPC. Great news indeed

[the primitive]

You're dismissing the latest evidence as though it didn't exist.

Hometrack's report shows the rate of falls decreasing, and both BBA and BoE report increased transactions.

As the price of houses falls, so the mortgage required also falls. So the chances of getting approved for a mortgage will increase, so the number of approvals will increase. So far so predictable

I cannot make the logical leap to prices going back up though?

This is not news really is it? it's what anyone would expect in a falling market.

Face it mate, even if we were ALL bulls, prices would still be falling because the money ain't there.

[ParticleMan]

[MississippiJohnHurt]

Why do these folk think house price will magically levitate?

If the wider economy was ok their might be some resonance to their argument.

However, the just look foolish and frankly desperate arguing this in the current climate.

...

I know, it’s great isn't it – us “perma bears” get accused of confirmation bias, yet the bulls jump on every possible stat, no matter how tenuous, to back up their “case”.

These BTL cheerleaders can cling onto as many surveys as they want showing that transactions went up one month, or price falls decelerated (!) But they can’t really argue against the fact that 6 months ago, the entire world financial system very nearly collapsed, and that the fall-out is only now beginning to spread into the real economy. And the engine of all this was the bursting of a historic asset bubble in housing. The thought that, within 6 months of the crisis really beginning, prices will stabilise, on the very asset that drove all this up the hill and back down again - is laughable. Getting excited over the pace of price falls decreasing for one month, Abbey offering a 5 year fix at 3%, or 88% of an asking price being achieved, is missing the point on a huge scale…. it’s the guy up to his neck in water who is pleased that his hair’s dry. The man who sits in his armchair looking for reasons to be cheerful, while his house burns down around him.

Don’t suppose this attitude is different to the psychology in previous asset bubbles: “I see the level of tulips purchased this month has risen. This is a leading indicator. It won’t be long now before prices return to normal……”

Hamish / Rinoa: got any thoughts on the above? No granular, useless “facts” taken from monthly surveys please. Just your thoughts on where we are in the economic cycle, what you see happening next, and why that backs your views on the future of the housing market.

[@contradevian]

As I suspected the threshold is around 80,000 approvals to stabilise prices 6 months down the line

Sadly there is only 38,000 credit worthy applicants left in the whole country

Wonder how much "sub prime" and liar loans used to for account for in monthly figures. Probably the bulk of it!

Edited 32,000 to 38,000

Edited March 30, 2009 by rover2000

[19 year mortgage 8itch]

In short, despite being over 18 months into the credit crunch, the deleveraging of the UK household sector has still not yet begun.

When you put it like that

Its funny that all I here from people at the moment is reducing debt and I'm deleveraging as fast as I can. Now either I know the wrong kind of people of someone is not telling the truth...

Either that or the UK household sector is, like Gordon, determined to spend its way out of the slump, with hilarious consequences...

[Bruce Banner]

Blah, blah..........

It looks like we are deeply in the recovery phase now......

...blah, blather....

.....Get over it.........

blather, blather.....

This sure will put the brakes on HPC. Great news indeed

Thanks for that.

Three out of the four named in my sig have now posted on this thread, that only leaves sibley

[Rinoa]

Gross lending is irrelevant. It's one half of the story. The other half of the story is where does the money come from to lend out.

At the moment the only lending being made is from repayment of capital from other people's mortgages. In fact it's even less than that, less than zero in fact.

Tell me, what will happen if an additional 100,000 houses are sold each month and there is no extra total money available to bid for them. The price of those houses sold will have to fall.

Higher approvals with no extra money is a very bad sign for you housing bulls.

Well, HSBC announced at the beginning of the years they had £15Bn to lend out on mortgages this year ~ mainly from their asian markets.

Lloyds/HBOS and RBS between them have around 50% of the UK market. They weren't lending due to their requirement to cover the possible cosequences over their debts. Now the govt. have taken that responsibility away from them they are free to lend out more. Indeed their contract with the govt. requires them to do so.

[GrillsBears]

Well, HSBC announced at the beginning of the years they had £15Bn to lend out on mortgages this year ~ mainly from their asian markets.

Lloyds/HBOS and RBS between them have around 50% of the UK market. They weren't lending due to their requirement to cover the possible cosequences over their debts. Now the govt. have taken that responsibility away from them they are free to lend out more. Indeed their contract with the govt. requires them to do so.

Just for clarity do you believe that that's a good thing? I mean tax payers underwriting the loans of a an investment institution?

[Guest DissipatedYouthIsValuable]

Last month's set of data was dismissed here as a blip.

It looks like we are deeply in the recovery phase now. Mortgage approvals will rise further, boosted by the available of credit. Get over it.

The billions the government had set aside to lend to consumers are now filtering throught the mortgage chain

More houses are exchanging hands, sun is shinning, spring bounce is definitely in the air.

This sure will put the brakes on HPC. Great news indeed

I've been up your wife all morning.

[Rinoa]

Hamish / Rinoa: got any thoughts on the above? No granular, useless "facts" taken from monthly surveys please.

Bears were very happy to talk about facts until very recently.