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The Knimbies who say No

B B A Figs May 2013

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Spreadsheet and commentary here:

http://www.bba.org.uk/statistics/article/may-2013-figures-for-the-high-street-banks/high-street-banking/

Personal deposits have risen by 5.5% over the year to May.

BBA statistics director, David Dooks said:

“New mortgage borrowing from the high street banks strengthened in May and approvals for both house purchase and remortgaging continued to rise. Unsecured consumer borrowing also saw a small net rise overall, in line with improved retail sales volumes.”

“SMEs use of their own high levels of cash resources and large companies’ use of alternative finance, means demand for bank borrowing is subdued and a reflection of challenging trading conditions.”

Last month the headline was regarding the growth of personal deposits and it is this which is highlighted again. The strength of mortgage lending is mentioned, and we've had a full on assualt of VI commentary in the past month or two to state the same thing.

The downtrend in net lending remains intact however:

stats250613.jpg

Mortgages

---------------

The sums lent in May are well up on other months this year, and quite a bit up on May last year, but as usual, the spin makes it sound as if we are back to the days of mirror-fogging laxity in lending decisions. The amount lent was last bettered only a couple of years ago, depending on whether you look at nsa (Sept 2011) or sa (Jun 2010, although 3 later months are within £100M of this month's total).

Gross lending, £Millions (nsa):

May 2013: £8,598

May 2012: £7,499

May 2001: £8,729

For context. Gross lending is still very depressed.

Net lending is still negative in May, although a much reduced negative figure of -£205M, the higher gross lending figure being more than matched by repayments. Whether you look at nsa or sa figures, net lending has been negative in every month in 2013.. The y-o-y trend (the red line on the graph above) is progressing into negative territory, now -0.2%. Janet Daley in the Telegraph mentioned this last month, but few others in the mainstream media seem to bother reporting this remarkable downtrend.

2013 cumulative net lending is -£3.5Bn.

The numbers of approvals for the various groups (remortgage, purchase, MEW) are consistent with that seen elsewhere- remortgage numbers are weak, FTB numbers are up a bit (although still at levels which were bettered at points since the onset of the crisis) and MEW continues to be a rarified practice.

The average advance of £159,200 is on the way up, perhaps we can expect this to go higher still if newbuild sales are making up a greater proportion of sales.

Personal Loans &CC

-----------------------------

Both fairly stable, loan balances seem to have found a natural level around £33Bn, and cc balances around £37Bn. Loan balances were last at this level in 2001 in nominal terms, having been double current levels at peak craziness, whereas credit cards are around all time highs, although in the nine years since 2004 cc balances have only increased by around 10%, so it seems that we are approximately fully tapped out on the cc debt front. I predict there will be no significant increase in either of these areas anytime soon. Perhaps the rise of car lease deals is removing demand for loans, despite some very cheap rates available via FLS.

---------------------------

Plenty more in the spreadsheet so have a look.

Last month's thread (April) is here:

http://www.housepricecrash.co.uk/forum/index.php?showtopic=190619

Edited by cheeznbreed

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looking at that graph...mortgage borrowing continues to contract.

As I suspected, the media are spinning everything they can this year...just got to ask yourself WHY ?

It's not "the media", it's the individuals working in the media. Individuals with above average income who are heavily into buy-to-let.

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Cheers for flagging this up CnB.

Just having a quick look at table 5 of the spreadsheet (NSA mortgage lending):

As with previous months capital repayment (all methods, i.e. regular monthly, upon redemption (sale or remortage), over payments etc.) is up again massively £9.539 bn in May from £8,311bn in April (+1.228bn MOM). This is the highest since the start of the banking crisis and much nearer boom levels.

This would suggest significant remortgage activity (but it was only up 492m on April) so something still a bit unexplained here.

Overseas cash buyers effectively paying off existing mortgages?

Or is lots of the new lending being concentrated into FTBs who are buying off second steppers with High LTVs?

Or lots of end of term IO (i.e. 25y endowment vintage) borrowers paying of the capital at the end of term

Total borrowed still falling down another £200m at £779bn i.e. Net lending still falling but more slowly.

Not much change in the average loan amount for purchase at £159,200 since this time last year.

Number of loans for house purchase up again to 43,041 which is one of the best months since the start of the crisis.

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looking at that graph...mortgage borrowing continues to contract.

As I suspected, the media are spinning everything they can this year...just got to ask yourself WHY ?

Indeed - we know the reasons...

Big increases in lending due to FLS by some banks but plenty of less good news:

Net lending down

Amount loaned per property virtual unchanged on last year (i.e prices are being propped but not pumped up by the banks)

Unsecured borrowing now at record data series lows (credit card trend is up but all other categories trending down) and then if data were in real terms!!!

Deposits at banks up

Business lending trending down - due to reduced investment

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Cheers for flagging this up CnB.

Just having a quick look at table 5 of the spreadsheet (NSA mortgage lending):

As with previous months capital repayment (all methods, i.e. regular monthly, upon redemption (sale or remortage), over payments etc.) is up again massively £9.539 bn in May from £8,311bn in April (+1.228bn MOM). This is the highest since the start of the banking crisis and much nearer boom levels.

This would suggest significant remortgage activity (but it was only up 492m on April) so something still a bit unexplained here.

Overseas cash buyers effectively paying off existing mortgages?

Or is lots of the new lending being concentrated into FTBs who are buying off second steppers with High LTVs?

Or lots of end of term IO (i.e. 25y endowment vintage) borrowers paying of the capital at the end of term

Total borrowed still falling down another £200m at £779bn i.e. Net lending still falling but more slowly.

Not much change in the average loan amount for purchase at £159,200 since this time last year.

Number of loans for house purchase up again to 43,041 which is one of the best months since the start of the crisis.

As it happens, I was hoping you would post on precisely that spreadsheet cell (repayments). As you say, remortgaging activity(numbers, value) is insufficient to explain it.

I'm not sure how the 20% equity loan part of the HTB is shown in banks figures, could it be involved here? E.g. bank approves total loan under HTB- Equity Loan, the equity loan part is then forwarded to the bank from the Treasury, showing as a repayment? Might be a complete misunderstanding on my part, and the numbers may be far too low to have this sort of influence.

Edit HTB is getting approximately 2,000 reservations per month according to media articles. Say an average HTB price of £160k, that means aproximately a maximum of £30k *2,000 = £60M per month in equity loans, clearly nowhere near enough even if they were accounted for in a manner which bumped repayments, which may not be the case at all anyway.

Edited by cheeznbreed

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As it happens, I was hoping you would post on precisely that spreadsheet cell (repayments). As you say, remortgaging activity(numbers, value) is insufficient to explain it.

I'm not sure how the 20% equity loan part of the HTB is shown in banks figures, could it be involved here? E.g. bank approves total loan under HTB- Equity Loan, the equity loan part is then forwarded to the bank from the Treasury, showing as a repayment? Might be a complete misunderstanding on my part, and the numbers may be far too low to have this sort of influence.

Edit HTB is getting approximately 2,000 reservations per month according to media articles. Say an average HTB price of £160k, that means aproximately a maximum of £30k *2,000 = £60M per month in equity loans, clearly nowhere near enough even if they were accounted for in a manner which bumped repayments, which may not be the case at all anyway.

Will post more detail in a bit but the BBA press release page 1 says

Higher capital repayment (notably including more full redemptions, as homeowners move between lenders) continue to generate the contractions in borrowing stocks seen over the past year.

but this doesn't match the numbers...

(unless nationwide who isn't in the BBA has super aggressively tried to grab market share which might align with the coverage last week!)

Edited by koala_bear

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When looking at BBA data we should also look at the BSA data which gets no press coverage (may be deliberatly on their part?) but the level of the data is a bit more interesting that the BBA and appears a few days later.

A slight aside on the UK mortgage market structure:

The approximate mortgage market share (new lending) Q1 2013 is

BBA ~67%

BSA ~ 24%

Other specialist lenders ~9%

Of the 6 BBA lenders most recent market share (trend vs long term in brackets):

Lloyds 18.5% (down)

Barclays 12.8% (up)

HSBC 11.5% (up lots)

Santander 9.6% (down lots i.e. halved market share)

RBS ~8% (down)

Virgin (NRock) ~6% (up lots)

Of the BSA lenders (~24%)

Nationwide 15.1% (up from ~8% in 4 years)

Coventry 2.8%

Skipton 1.1%

CoOp 1.1%

(remainder of BSA) 3.9%

Specialist lenders ~9%

Yorkshire 2.9%

clydesdale 1.9%

(remainder of specialist) 4.2%

So the only way the BBA statement on re-mortgaging being mostly responsible for the increase in capital repayments is if Nationwide has been doing massive amounts of re-mortgaging to grab the FLS cash. If the brakes get put on that by the BoE requiring more capital to be held...

Interestingly the BSA data releases also cover the BBA 6 but with more granularity of data categories the the BBA own (public) data.

For BSA members redemptions are stable (i.e. people sticking with good existing deals) but BBA redemptions are up in the last few months by £1bn / month so NW might be responsible for £600-800m??? of the extra re-mortgaging when looking at all the data.

Edit to add:

Regular monthly capital repayments rising faster than would be expected with a shift to repayment mortgages (i.e. 100% IO ban) unless the average lending term on a new loan is less than 15 years i.e 50+ year olds re-mortgaging (+MEWing)?

Edited by koala_bear

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When looking at BBA data we should also look at the BSA data which gets no press coverage (may be deliberatly on their part?) but the level of the data is a bit more interesting that the BBA and appears a few days later.

A slight aside on the UK mortgage market structure:

The approximate mortgage market share (new lending) Q1 2013 is

BBA ~67%

BSA ~ 24%

Other specialist lenders ~9%

Of the 6 BBA lenders most recent market share (trend vs long term in brackets):

Lloyds 18.5% (down)

Barclays 12.8% (up)

HSBC 11.5% (up lots)

Santander 9.6% (down lots i.e. halved market share)

RBS ~8% (down)

Virgin (NRock) ~6% (up lots)

Of the BSA lenders (~24%)

Nationwide 15.1% (up from ~8% in 4 years)

Coventry 2.8%

Skipton 1.1%

CoOp 1.1%

(remainder of BSA) 3.9%

Specialist lenders ~9%

Yorkshire 2.9%

clydesdale 1.9%

(remainder of specialist) 4.2%

So the only way the BBA statement on re-mortgaging being mostly responsible for the increase in capital repayments is if Nationwide has been doing massive amounts of re-mortgaging to grab the FLS cash. If the brakes get put on that by the BoE requiring more capital to be held...

Interestingly the BSA data releases also cover the BBA 6 but with more granularity of data categories the the BBA own (public) data.

For BSA members redemptions are stable (i.e. people sticking with good existing deals) but BBA redemptions are up in the last few months by £1bn / month so NW might be responsible for £600-800m??? of the extra re-mortgaging when looking at all the data.

Cracking, nicely put together. NW are reportedly miffed about having a spanner thrown in the works of their mortgage-grab, and it seems we know why, looks like they were ramping up significantly. Next month's BBA figs will probably show a similar story, given the recent report on capital raising was released only recently, but the month after that might be when a braking effect is seen.

Might be worth a seperate BSA thread when these are released to try and keep abreast of developments.

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Cracking, nicely put together. NW are reportedly miffed about having a spanner thrown in the works of their mortgage-grab, and it seems we know why, looks like they were ramping up significantly. Next month's BBA figs will probably show a similar story, given the recent report on capital raising was released only recently, but the month after that might be when a braking effect is seen.

Might be worth a seperate BSA thread when these are released to try and keep abreast of developments.

NW need profitable mortgage customers because they have hundreds of thousands of borrowers on unprofitable IRs so they need new customers to cross-subsidise...

NW probably reckoned that re-mortgaging was safer and easier than "new" lending with New Buy etc. and they could pick better than average quality borrowers...

[The other solutions include BoI style rate hikes :o]

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NW need profitable mortgage customers because they have hundreds of thousands of borrowers on unprofitable IRs so they need new customers to cross-subsidise...

NW probably reckoned that re-mortgaging was safer and easier than "new" lending with New Buy etc. and they could pick better than average quality borrowers...

[The other solutions include BoI style rate hikes :o]

So the pressure is on NW. It'll be interesting to see how they deal with this pickle. It would be a pretty big about turn to do a BoI, perhaps they'll get the captial requirements watered down instead.

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So the pressure is on NW. It'll be interesting to see how they deal with this pickle. It would be a pretty big about turn to do a BoI, perhaps they'll get the captial requirements watered down instead.

The question is the choreography, they will get a revised opinion on the capital requirements and have plenty of time to get there but the question is whether they slow the FLS based surge in lending in the mean time (they won't get penalised for slowing lending now as they have already done so much extra) or just carry on lending as they have been and adjust later.

The former would cause an interesting market blip the later keeps the Southeast "boom" going before stage of help for home builders kicks in.

Edited by koala_bear

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Here's the Telegraph's take, which I think it is fair to say is at odds with the picture presented on this thread. They might have said 'since comparable records began' rather than 'in over a decade' in the subheadline in reference to net lending contraction from BBA members.

http://www.telegraph.co.uk/finance/personalfinance/borrowing/mortgages/10141494/Borrowers-repay-mortgages-faster-than-banks-lend-new-ones.html

Borrowers repay mortgages faster than banks lend new ones

The total amount of credit in the housing system has now contracted for the longest period in over a decade.

The number of new mortgages agreed is growing strongly, banks say – but the statistics also reveal nervous home owners desperately paying down their existing loans. As a result, the total amount of credit in the housing system has now contracted for the longest period in over a decade. The impact on house prices is likely to be negative, economists warn.

Lending data for May from the British Bankers’ Association highlighted an increase in the numbers of mortgages approved and in the sums lent, which were substantially higher than April’s figures and than a year ago. The trade body said the number of mortgages approved in May was up ten per cent over a year. Loans for house purchase were at their highest in three years, the BBA said.

But the BBA’s top-line statistics exclude billions of pounds of repayments by existing borrowers, which exceed the value of lending and so push the total 'net' lending into the red.

May was the fifth consecutive month to record a negative net lending figure, marking the longest period of total UK mortgage contraction since 1997, when comparable data began to be collected. At the height of the housing market boom in 2007, monthly net lending regularly exceeded £6bn. By contrast a net £500m was repaid in last month – otherwise expressed as ‘negative net lending’. Since January this year, total mortgage lending has contracted by over £3bn.

Analysts explained the apparent contradiction by saying mortgage approvals are growing from extreme lows. In addition, only a few lenders – such as building societies Nationwide and Coventry – are genuinely growing total lending. Others, like Lloyds Banking Group, which owns the Halifax brand, are shrinking their loan books despite being able to demonstrate a current increase in approvals.

Hidden within the total data are also a large number of remortgages, whereby existing home owners – particularly those with equity in their property – are taking advantage of record low rates to swap provider. These borrowers are believed to be the biggest beneficiaries of the Government’s flagship Funding For Lending scheme, supposed to boost the housing market by giving lenders access to cheap finance.

"A lot of existing mortgage debt is simply being circulated from one lender to another," said mortgage analyst David Hollingworth of broker London & Country in Bath.

"Lenders are keen to do business with attractive, lower risk borrowers and that is where they will compete, rather than necessarily lending to new borrowers or increasing lending to existing ones."

Certain lenders, such as the UK division of the Bank of Ireland, are going further, and actively encouraging existing borrowers to repay their loans. Incentives include waiving early repayment penalties or offers of free mortgage broker services.

Matthew Pointon, property economist at Capital Economics, said the BBA data showed "mortgage approvals clawing their way back after five years of subdued activity" but warned that an "aggregate withdrawal of credit" would "constrain house price gains".

The quote about 'nervous homeowners' repaying debt is a myth which has regularly been trotted out over the years. David Hollingworth touches upon the issues identified by koala_bear further up the thread- the repayment spike coming from a non-BBA member which is not matched by a commensurate rise in BBA lending to make net lending amongst BBA members positive. Strangely the hack here suggests that they've delved into the figures with their comment on remortgaging, but had they done so they would have surely realised that something was amiss.

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Here's the Telegraph's take, which I think it is fair to say is at odds with the picture presented on this thread. They might have said 'since comparable records began' rather than 'in over a decade' in the subheadline in reference to net lending contraction from BBA members.

http://www.telegraph...d-new-ones.html

The quote about 'nervous homeowners' repaying debt is a myth which has regularly been trotted out over the years. David Hollingworth touches upon the issues identified by koala_bear further up the thread- the repayment spike coming from a non-BBA member which is not matched by a commensurate rise in BBA lending to make net lending amongst BBA members positive. Strangely the hack here suggests that they've delved into the figures with their comment on remortgaging, but had they done so they would have surely realised that something was amiss.

The telegraph article was lot better than I was expecting (copy + paste of press release).

They have partially delved into the figures hence don't have the full picture.

The latest month for repayment data (BoE data via BSA, so almost 100% of the market) is April '13: [april 2012 data for comparison]

Monthly repayments: £3.464bn [£2,870bn] delta = £594m

Redemptions: £7.854bn [£6.589bn] delta = £1.26bn {all time high of 21bn in July 2007!}

Other lump repayments: £1.297bn [£1.086bn] delta = £211m

Total 12.6bn

--> This would suggest an average total churn and repayment in 7-8 years... except the money gets lend out immediately to keep the plates spinning.;)

[monthly repayments only on the same basis would indicate a repayment period of 28 years, hence longer than 25 year mortgages, MEWing, IO mortgages and needing to downsize at retirement all creating that long time to repay. i.e. UK property market based on no actually having to repay capital??? just flogging the house to some one else to rent from the bank]

Nervous home owners over paying would come in the other lump sum category so there is some truth in what the telegraph says just not the complete picture. An increase of ~£200m in the monthly total in a year is equivalent to overpaying an extra £50 a month on average.

(Which might then get them a lower LTV product on re-mortgage!) Might this also include flexible offset type accounts where borrowers are holding more cash rather than spending it so it counts as a repayment?)

David Hollingworth is usually pretty good on analysis. So if existing IO borrowers (with mansions) in the southeast have been massively re-mortgaging with NW but switching to repayment it still doesn't add up.*

This would make the telegraph comment technically correct :blink:

* Now if we were to assume that all the borrowers re-mortgaging had substantially bigger than average mortgages and swapped from IO to repayment and have relatively good LTV to high multiple and only want a 10-15 year mortgage we might be get the numbers to nearly add up.

Edit to add:

The increase in regular monthly repayments is equivalent a to 2% drop in retails sales in terms of wider economic impact.

Edited by koala_bear

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  • 244 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
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      • Even
      • up 2.5%
      • up 5%



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