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benjamin

Mortgage Approvals

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Makes you wonder doesn't it? On the one hand we have a slowing market:

http://uk.biz.yahoo.com/051129/323/fy1ah.html

And on the other, more people borrowing against their homes with ever increasing levels of debt being reported by the banks and other VIs.

As Nationwide says the house market is levelling and not expected to go anywhere for years what are people doing with all that money they are borrowing? Big screen TVs are apparently in short supply which may accoujt for some of the money borrowed against houses.

Ah, but perhaps the VIs want us to think Nationwide have it all wrong and that people are buying houses and that we are seeing a pre-Christmas bounce?

Confusion reigns supreme--perhaps this will be the trigger event?

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MEWing for christmas IMHO.

When I was young my parents bought me presents that they could afford, if they were skint then the presents weren't as nice.

Today I know of people who live on a council estate house that they had the 'right to buy' and their kids get new playstations/bikes/xbox/etc every year despite niether parent earning that much.

All of the money has to come from somewhere and it dosen't seem like too many have been earning it.

Spend now, earn later. Spend it like Beckham.

The ASHE Stats (From ONS) on earnings for my area show an average wage of about £20K, but I keep seeing new cars and people buying big TVs etc... clearly many are spending beyond their means.

I earn in excess of double the local average wage before I get my bonus, and yet sometimes I reign my spending in when I feel a bit skint... I'm certainly not in the market for spending £1000+ on a plasma TV and SKY+.

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MEWing for christmas IMHO.

Yes, and loads of fixed rate deals are coming to an end so people are remortgaging to find the best deal as rates have risen.

Very much doubt that this relfects many new buyers entering the market.

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Guest wrongmove

Yes, and loads of fixed rate deals are coming to an end so people are remortgaging to find the best deal as rates have risen.

Very much doubt that this relfects many new buyers entering the market.

Unfortunately, the figure is mortgage approvals for house purchase, and excludes MEW and remortgaging for a better rate:

Official data showed loans agreed for house purchase rose to 113,000 in October from an upwardly revised 108,000 the month before.

This is not good news for FTBs. A figure of over 90k has historically meant upwards pressure on HPI about six months later. The correlation is very strong, about 90%, so the chances of drops in the next 6-9 months look pretty low.

There were however periods in the last crash where approvals picked up. But mortgage approvals are the best forward indicator available.

The subject is covered in detail in this thread on TMF: Approvals and HPI

We bears/FTBs need approvals to drop down, and quickly. Current levels suggest HPI may approach double figures within 9 months. :(

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wrongmove,

You have to look at the transaction numbers in the context of market supply as well. Yes increasing transaction numbers are normally associated with increasing prices however during 2004 and 2004 in many areas supply was amazingly tight. The last "I've got to buy" cohort may well have been flushed through the system, given the non and wink to do so by the prospect of reducing interest rates and of being priced out further by a flurry of SIPPers in the spring and given the ammunition to do so by contiunuing lax lending and a much bigger supply of property on EA's books.

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Unfortunately, the figure is mortgage approvals for house purchase, and excludes MEW and remortgaging for a better rate:

This is not good news for FTBs. A figure of over 90k has historically meant upwards pressure on HPI about six months later. The correlation is very strong, about 90%, so the chances of drops in the next 6-9 months look pretty low.

There were however periods in the last crash where approvals picked up. But mortgage approvals are the best forward indicator available.

The subject is covered in detail in this thread on TMF: Approvals and HPI

We bears/FTBs need approvals to drop down, and quickly. Current levels suggest HPI may approach double figures within 9 months. :(

Yes, you are right but don't expect the ostriches on here to acknowledge that. All current stats indicate prices won't be dropping in the near term. Its not good news.

The next 2-3 months are writes off's for the property market until spring arrives. So even if activity and mortgage lending drops in Dec/Jan it means nothing. We won't know whats likely to happen until March arrives. Until then, lets hope its a cold winter and we can enjoy lots of snow !

Unfortunately, I don't believe the weathermen either. I'll wager, it'll be typically mild again and all this hysteria about a cold winter will turn out to be just more of the same old sensationalisation of daily life that seems to be going on !

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Guest wrongmove

You have to look at the transaction numbers in the context of market supply as well. Yes increasing transaction numbers are normally associated with increasing prices however during 2004 and 2004 in many areas supply was amazingly tight. The last "I've got to buy" cohort may well have been flushed through the system, given the non and wink to do so by the prospect of reducing interest rates and of being priced out further by a flurry of SIPPers in the spring and given the ammunition to do so by contiunuing lax lending and a much bigger supply of property on EA's books.

That's my hope OM. I want Ed Stansfield to be right: UPDATE 2-UK house prices flat in November -Nationwide

"These discrepancies tend to reinforce our suspicions that much of the rise in approvals could be down to a temporary release of pent-up demand in the wake of August's interest rate cut," said Ed Stansfield, an economist at Capital Economics.

His track record is not good however! I would prefer approvals to be nearer 80k at this stage though. As I said above, approvals have given false signals before. But they are accurate more often that not.

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wrongmove,

Don't forget NAEA FTB numbers back down to 9%, without the bottom rung there is no housing market - as has been witnessed in part and briefly when the whole thing gummed up in 2004, BTL need to fully replace the other 20/30/40% of demand at the bottom to keep the whole edifice from sliding back down.

I don't think that is likely in anything other than short term spurts, certainly not with the level of returns available now and the huge accumulated risk of significant capital losses.

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Check the following link out. How's this for one finger up at Tony Blair? Applications are up but how many ppl are being totally honest when applying? Obviously not a lot if this headline has made it onto the BBCs News site. Nevermind Tony. Time to cancel the new fleet of Jags' and buy a Focus ha ha ha ha ha.

http://news.bbc.co.uk/1/hi/business/4481818.stm

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Guest wrongmove

I don't think that is likely in anything other than short term spurts, certainly not with the level of returns available now and the huge accumulated risk of significant capital losses.

I agree that the risks are mainly on the downside, but the upside is rearing its ugly head at the moment. On balance, I will personally continue to rent and save for now. But if I really wanted to own, if I had family to consider for example, I may be tempted to bargain hunt. I could survive a drop of 10% (if I brought), but a 10% rise (if I don't) could really cause me problems.

Cheers OM

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Check the following link out. How's this for one finger up at Tony Blair? Applications are up but how many ppl are being totally honest when applying? Obviously not a lot if this headline has made it onto the BBCs News site. Nevermind Tony. Time to cancel the new fleet of Jags' and buy a Focus ha ha ha ha ha.

http://news.bbc.co.uk/1/hi/business/4481818.stm

Looks like Eric has been vindicated at last!

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Megaflop,

Or speculators looking to flip property in the spring to the SIPPers.

Just remember this is the new found stability. :lol:

I'm not being funny, OnlyMe, but I'm not 100% debunking SIPPs myself just yet. Not with the news last month that Dad is considering buying with a SIPP. But that's another story - one of a 60 year old man who seems to have gone through 1989-1995 with his eyes closed. :rolleyes:

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I'm not being funny, OnlyMe, but I'm not 100% debunking SIPPs myself just yet. Not with the news last month that Dad is considering buying with a SIPP. But that's another story - one of a 60 year old man who seems to have gone through 1989-1995 with his eyes closed. :rolleyes:

Oops sorry, forgot about that little episode. I'm not debunking the potential uplift effect of SIPPS either apart from the fact that this is being painted as stability, it most definitely is not, no more fickle a bunch can you get than investors - creaming themselves one minute, cra&&ing themselves the next. A land of Buffets it is not.

Edited by OnlyMe

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Smell the Fear,

Well picked up, that should have been Buffett, although I suppose buffet would do just as well. :lol:

Edited by OnlyMe

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Yes, these approvals numbers are worrying. However, some of the graphs I have seen on the TMF site have seemed to me to show a weakening correlation between approvals and HPI in recent quarters. This could be a glimmer of hope. Approvals have to make it through a chain before they achieve sales.

A second point is that this is just one months numbers, it might be a blip.

I like the idea about smart arses buying BTL's to flip to silly SIPPER's in the spring, somehow though I don't buy it, this seems a little too much like clutching at straws to me.

With so few FTB's who is going to be starting all those chains? It will have to be BTL-ers and downsizers.

It would be interesting to get a breakdown of proportion of approvals for different price bands, and also for the BTL/non BTL loan percentage over time. That might be more informative.

Like other STR bears its essential to keep an eye on what happens next year. 2006 has for the past 2 years been my personal bet for when the wind will change. I'm not sure what I will do if there is a strong market rally next year.

I've been looking for good BTL opportunities for the last couple of weeks as a "thought-experiment", so that I can try to believe in the bulls case. All I can see is bad yields in the experiments I have been performing. (I have a model which I check by finding similar rental/sale properties and calculating yield for good and bad interest rate cases). At the moment, my experiments show that a 30% drop in sale price is required to provide a zero yield at interest rates of around 7% which is the long run neutral rate. At current rates I am getting at most 1% net yields, even with the gearing I don't think that this is a sensible risk to be taking. The properties I have been looking at are 1-3 bed flats in London E1 and E2. I haven't been looking at new builds, mostly older conversions, ex-LA and so on.

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I've been looking for good BTL opportunities for the last couple of weeks as a "thought-experiment", so that I can try to believe in the bulls case. All I can see is bad yields in the experiments I have been performing. (I have a model which I check by finding similar rental/sale properties and calculating yield for good and bad interest rate cases). At the moment, my experiments show that a 30% drop in sale price is required to provide a zero yield at interest rates of around 7% which is the long run neutral rate. At current rates I am getting at most 1% net yields, even with the gearing I don't think that this is a sensible risk to be taking. The properties I have been looking at are 1-3 bed flats in London E1 and E2. I haven't been looking at new builds, mostly older conversions, ex-LA and so on.

The way to get the yield numbers to work is to rent out by the room and be an HMO slumlord. Just how sustainable this is as a "business" model is another matter!

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  • 302 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% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



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