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Sky: " Net Mortgage Lending Weakest Since 2000"

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http://uk.biz.yahoo.com/090825/140/ippax.html

Financial News

Tuesday August 25, 09:51 AM

Net Mortgage Lending Weakest Since 2000

By Sky News 2009

Net Mortgage Lending Weakest Since 2000

Net mortgage lending for the UK last monthsaw its smallest rise since October 2000, figures from the British Bankers' Association show.

The group said net lending, which strips out redemptions and repayments, fell to £1.6bn as borrowers sought to reduce their mortgage debt.

But on a brighter note, the number of mortgages approved for house purchase jumped to a 17-month high as buyers continued to return to the property market.

A total of 38,181 loans were approved for people buying a home, 77% more than in July last year and the highest level since February 2008, the BBA said.

There was also a rise in total mortgage advances, with £8.4bn lent during the month, up from £8.1bn in June.

Despite the increase in the number of loans granted, the BBA said the figures were below seasonal expectations.

What--the stimulus running a bit dry just as summer ends and winter looms?

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http://uk.biz.yahoo.com/090825/140/ippax.html

Financial News

Tuesday August 25, 09:51 AM

Net Mortgage Lending Weakest Since 2000

By Sky News 2009

Net Mortgage Lending Weakest Since 2000

Net mortgage lending for the UK last monthsaw its smallest rise since October 2000, figures from the British Bankers' Association show.

The group said net lending, which strips out redemptions and repayments, fell to £1.6bn as borrowers sought to reduce their mortgage debt.

But on a brighter note, the number of mortgages approved for house purchase jumped to a 17-month high as buyers continued to return to the property market.

A total of 38,181 loans were approved for people buying a home, 77% more than in July last year and the highest level since February 2008, the BBA said.

There was also a rise in total mortgage advances, with £8.4bn lent during the month, up from £8.1bn in June.

Despite the increase in the number of loans granted, the BBA said the figures were below seasonal expectations.

What--the stimulus running a bit dry just as summer ends and winter looms?

But the amount of lending is still rising is it not?

Edited by Where is my pen?

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But the amount of lending is still rising is it not?

A drowning man will nearly always bob up and down a few times as he slowly looses the struggle and sinks to the bottom.

IMO, that is characteristic of all crashes--rarely even and often consisting of a few bumps in the graph. Longer term this housing market is in terminal decline.

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This is net mortgage lending. So new loans less repayments on exisiting mortgages.

What this report says is that new lending is rising but the amount that existing mortgage holders are repaying off thier mortgages is even larger.

So this report dispells a couple of myths that are believed to be truth here.

1) The belief here is that only a very few mortgage holders in the UK are benefitiing from low interest rates either SVR or tracker and that most mortage holders are struggling on rates at 7%.

2) the small percentage of people that are benefiting in low mortgage rates are just wasting the money on consumer tat and not being sensible by overpaying thier mortgage when IR's are low.

This report flies in the face of those assumptions it seems that a lot of people are benefiting from low IR's and they are being sensible and paying down thier mortgage debt.

This will become a virtuous circle. More people paying down debt, mortgages become smaller vs LTV so banks have less risk as less npotential for negative equity, banks have more money to lend, etc, etc.

This is a very different HPC from the 90's becasue of the ZIRP policy as opposed to the 90's when the bank squeezed the mortgage holder very hard. What happened in the 90's in terms of neagtive equity and repos and distressed sales and people hating the house that they had overpaid for is not going to happen this time.

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So this report dispells a couple of myths that are believed to be truth here.

1) The belief here is that only a very few mortgage holders in the UK are benefitiing from low interest rates either SVR or tracker and that most mortage holders are struggling on rates at 7%.

2) the small percentage of people that are benefiting in low mortgage rates are just wasting the money on consumer tat and not being sensible by overpaying thier mortgage when IR's are low.

Really?

I thought that people where expecting a rate reset timebomb in the UK as base rate tracker deals come to an end?

If 2 is happening what does that do for aggregate demand?

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Really?

I thought that people where expecting a rate reset timebomb in the UK as base rate tracker deals come to an end?

If 2 is happening what does that do for aggregate demand?

That is another fallacy on here that the belief is that when all this cheap trackers come to end they revert to 7% interest rates and again this is not true most revert to either a figure over base rate or the lenders svr whcih seems to range between 2% and 3.95%. These rates are still historically very low for mortgages. until the base rate hits 4% ot 5% there is not a lot of pain instore for mortgage holders.

Like it or not and we can all be angry that the banks have been bailed out savers hit hard and reckless property investors bailed out. But the fact is that if you have a motgage and a job or decent savings then you are quids in.

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BBC Fivelive news is headlining its bulletins with this story stating that mortgage lending is up on last year - huge positive spin being put on the info.

When I awoke, turned on my radio and heard that my heart sunk until I read other news sources.

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40,000 possessions and bad debts must surely affect the net lending figures.

800 mortgages a week going bad is going to affect it pretty bad.

800*£100000 =£80,000,000= £320,000,000 every month.

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ralphmalph

You may well be right in many aspects - though some are on truly ludicrous mortgage payments thanks to trackers taken out before ZIRP - an astounding skewing of the whole loans/savings market, a few many be able to pay back a lot. Many of those trackers were only short term, 2 year jobs so that situation will change soon for many.

On the flp side the ZIRP policy is entirely angled at preventing the necessary cost adjustments (except by devaluation of the currency), which means more lost jobs, less future investment, more damage to the real economy. A situation which will breed no long term recovery and no long term prospects.

Sensible companies will be taking this liquidity opportunity to shut down what is left of increasingly non-competitive production (and services), take the brownfield land value and sod off abroad.

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40,000 possessions and bad debts must surely affect the net lending figures.

800 mortgages a week going bad is going to affect it pretty bad.

800*£100000 =£80,000,000= £320,000,000 every month.

Where are those figures from Bloo?

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BBC Fivelive news is headlining its bulletins with this story stating that mortgage lending is up on last year - huge positive spin being put on the info.

When I awoke, turned on my radio and heard that my heart sunk until I read other news sources.

I thought the same when I woke up too! Its amazing the different spin that can be put on exactly the same results... I guess its the best time to remember that all reporting is biased and to just read the report and make up your own mind.

Still, I guess most on this site already do that, as I have yet to view a biased post /sarcasm

;)

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Just for the record - it's the number of approvals that correlate with HPI, and these are continuing on their recent up trend, so we have +7% MoM (sa) and +81% YoY today and pretty much what we'd expect having seen the BoE lending panel data yesterday. :)

The {dead cat bounce | recovereh} continues...

Edit to add BBA link

http://www.bba.org.uk/bba/jsp/polopoly.jsp?d=145&a=16458

Edited by spline

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Also in the report is that the indebted britsh person is also paying of loans and credit cards and yet still saved a record 2.5 billion into savings accounts.

Look I know I am viewd as an optimist on here but at this stage of a recession with rising unemployment you would not expect people to be paying of debts they should be hoarding cash for the bad times to come.

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ralphmalph

You may well be right in many aspects - though some are on truly ludicrous mortgage payments thanks to trackers taken out before ZIRP - an astounding skewing of the whole loans/savings market, a few many be able to pay back a lot. Many of those trackers were only short term, 2 year jobs so that situation will change soon for many.

On the flp side the ZIRP policy is entirely angled at preventing the necessary cost adjustments (except by devaluation of the currency), which means more lost jobs, less future investment, more damage to the real economy. A situation which will breed no long term recovery and no long term prospects.

Sensible companies will be taking this liquidity opportunity to shut down what is left of increasingly non-competitive production (and services), take the brownfield land value and sod off abroad.

I addressed the tracker reset issue. When they reset they reset to historically low IR's to about 2% to 3.95%, so still no pain. Also the same is true of the people that fixed at 5.5 to 7% when they reset after 2 years they rest to the SVR 2.5% to 3.95%.

As I said no pain until BoE rises base rate to 4 to 5%.

A lower pound is good for investment. I set up the European oeprations for a US software comapny and the pound was 1.43 to the dollar. I recruited loads of staff because the yanks went 50KGBP equals 71K USD - Cheaper than the US. Same with rent, same with flights. When the pond hit 1.85 to the dollar they said no more staff too expensive. When it hit 2.05 to the dollar we started to move admin jobs back to America and reduced headcount here.

Same with manufactured goods there are net cheaper in export markets in local currecny.

Your argument about a lower pound hurting investment and jobs is illogical.

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Also in the report is that the indebted britsh person is also paying of loans and credit cards and yet still saved a record 2.5 billion into savings accounts.

Look I know I am viewd as an optimist on here but at this stage of a recession with rising unemployment you would not expect people to be paying of debts they should be hoarding cash for the bad times to come.

I would say the 2.5 bill in savings is pretty impressive though

Although I contributed quite a lot to those figures!

Interesting to see, average mortgage taken out was 220,000. A lot bigger than I was expecting tbh.

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Also in the report is that the indebted britsh person is also paying of loans and credit cards and yet still saved a record 2.5 billion into savings accounts.

Look I know I am viewd as an optimist on here but at this stage of a recession with rising unemployment you would not expect people to be paying of debts they should be hoarding cash for the bad times to come.

Point 1 - depends on the distribution of who is paying back and who is still paying (increasing in the case of loans and credit cards) interest payments.

Point 2 - Consider both of those as different sides of the same coin - when savings rates are low paying back debt is a better bet for most. Also means that people see little profit in investing, better to save/pay back.

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That is another fallacy on here that the belief is that when all this cheap trackers come to end they revert to 7% interest rates and again this is not true most revert to either a figure over base rate or the lenders svr whcih seems to range between 2% and 3.95%. These rates are still historically very low for mortgages. until the base rate hits 4% ot 5% there is not a lot of pain instore for mortgage holders.

Like it or not and we can all be angry that the banks have been bailed out savers hit hard and reckless property investors bailed out. But the fact is that if you have a motgage and a job or decent savings then you are quids in.

13266.jpg

So the market are pricing in mortgage rates to go up to 3.5% - 5% by the end of next year

Assuming the spread between mortgage rate and BOEBR stays as it is

If wages rise, I'd expect the spread to narrow. As it is I expect wages will fall (global wage arbitrage, weak unions, bankrupt Gov), and borrowing costs to rise

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13266.jpg

So the market are pricing in mortgage rates to go up to 3.5% - 5% by the end of next year

Assuming the spread between mortgage rate and BOEBR stays as it is

If wages rise, I'd expect the spread to narrow. As it is I expect wages will fall (global wage arbitrage, weak unions, bankrupt Gov), and borrowing costs to rise

rates for new mortgages are already 4.5% to 8% today. I do not know what new mortgage rates or SVR's will be next year. But if you have a tracker that reverts to 1% above base when it resets or 1.5% above base then 3% to 3.6% reset rate is still historically very low.

I think a lot will depend on how well the banks have rebuilt thier balance sheets.

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Just for the record - it's the number of approvals that correlate with HPI, and these are continuing on their recent up trend, so we have +7% MoM (sa) and +81% YoY today and pretty much what we'd expect having seen the BoE lending panel data yesterday. :)

The {dead cat bounce | recovereh} continues...

Edit to add BBA link

http://www.bba.org.uk/bba/jsp/polopoly.jsp?d=145&a=16458

Hi Spline

At what point will the red line on this graph of yours start to go back up?

kq_jul2009.png

post-5424-1251198194_thumb.png

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I thought the same when I woke up too! Its amazing the different spin that can be put on exactly the same results... I guess its the best time to remember that all reporting is biased and to just read the report and make up your own mind.

Still, I guess most on this site already do that, as I have yet to view a biased post /sarcasm

;)

Problem is, Joe Public listening to the Beeb today will just hear positive spin being put on house sales by BBC journos - like Goebbels' propaganda.

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Hi Spline

At what point will the red line on this graph of yours start to go back up?

Hi WW

This is the neutral level Q (i.e. approvals needed to sustain zero HPI) - historically, it’s typically around 80k, but does vary a bit depending on the makeup of the market. I tend to think of it as mostly reflecting the combined effects of two different things in the market: (1) a supply side parameter, same sort of role as the stock level in the RICS sales-to-stock ratio; and (2) a mortgage-cash buyer ratio, as really we are proxying transactions (laggy) with approvals (more timely) and if the ratio changes then so will the neutral level.

At the moment with restricted mortgages the ratio of mortgage-to-cash buyers has fallen, and obviously the Q has fallen with it, but also the supply of houses looks restricted (marginal cost of remortgaging, reduced house prices) and this further reduces Q. [interestingly, during 2006-07 it was pushed up above 80k by the very active 'specialist' lenders]

It will drift back up as the proportion of mortgage to cash sales increases and the supply side logjam eases. Incidentally, the number is backed out of the data algorithmically but it takes a few months of data to move it significantly. During these moves the HPI filter outputs can swing and slightly overhsoot, but this swing is useful as it clearly marks the underlying change. B)

Link to the house price predictor page.

Edited by spline

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This is net mortgage lending. So new loans less repayments on exisiting mortgages.

What this report says is that new lending is rising but the amount that existing mortgage holders are repaying off thier mortgages is even larger.

So this report dispells a couple of myths that are believed to be truth here.

1) The belief here is that only a very few mortgage holders in the UK are benefitiing from low interest rates either SVR or tracker and that most mortage holders are struggling on rates at 7%.

2) the small percentage of people that are benefiting in low mortgage rates are just wasting the money on consumer tat and not being sensible by overpaying thier mortgage when IR's are low.

This report flies in the face of those assumptions it seems that a lot of people are benefiting from low IR's and they are being sensible and paying down thier mortgage debt.

This will become a virtuous circle. More people paying down debt, mortgages become smaller vs LTV so banks have less risk as less npotential for negative equity, banks have more money to lend, etc, etc.

This is a very different HPC from the 90's becasue of the ZIRP policy as opposed to the 90's when the bank squeezed the mortgage holder very hard. What happened in the 90's in terms of neagtive equity and repos and distressed sales and people hating the house that they had overpaid for is not going to happen this time.

very clearly put. I agree.

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Look I know I am viewd as an optimist on here but at this stage of a recession with rising unemployment you would not expect people to be paying of debts they should be hoarding cash for the bad times to come.

Paying down debt and increasing savings amount to the same thing.

The consumer is deleveraging. All money that goes to reducing debt or hoarding in bank accounts is money that is withdrawn from the economy.

House prices may well be supported now, but the economy isn't.

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rates for new mortgages are already 4.5% to 8% today. I do not know what new mortgage rates or SVR's will be next year. But if you have a tracker that reverts to 1% above base when it resets or 1.5% above base then 3% to 3.6% reset rate is still historically very low.

I think a lot will depend on how well the banks have rebuilt thier balance sheets.

If new mortgages are 4.5 - 8%, a jump in BOEBR of 1.7% will put the new rates at 6.2 - 9.7%. I agree about the lifetime/ long-term trackers, but also believe they form a small portion of the overall mortgage market

With respect to the banks, I believe they are in serious trouble. They are marking assets to model, yet current market valuations after bank seizure are coming in >40% lower. They are also manipulating prices (it seems) by selling off repos to subsidiaries somehow delaying crystallising the loss. The only way they can 'earn' their way out of this is if the consumer earns his way out of this. But there are myriad obstacles to this from loss of cheap credit, wage deflation pressures, rising taxes and import costs, rising unemployment and a fundamentally unbalanced economy that will take years/ decades to restructure.

Even banks that have rebuilt their balance sheets will charge higher interest rates to reflect the risk of default by the borrower.

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Point 2 - Consider both of those as different sides of the same coin - when savings rates are low paying back debt is a better bet for most. Also means that people see little profit in investing, better to save/pay back.

I think that is spot on as a business we are overpaying the mortgage rather than hiring (investing) as a person chopped my old ML in Sunday and then was going to finance but thought what the hell -money is earning sod all so paid cash. Not quite the same thing thing but that 15k could of gone into the business again an investment opportunity not taken.

Ponzi Brown really doesn't realise what he has done in terms of stopping businesses investing. The constant rubbish talked and the massive interventions will drive unemployment through the roof by creating the environment for under investment and layoffs.

Edited by Greg Bowman

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