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Irkuiem

Mortgage Approval Theory

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Quite a lot has been said about the apparant rise in asking prices (1.4% nationwide this month) and the support offered for this by rising mortgage approvals. This has made me a bit nervous lately. It seems everyone has an answer for disproving this and like a good old HPC'er I would like to throw one in that I have not seen here yet. Hopefully someone can help prove or disprove this arguement with some good old fashioned figures from years past.

The theory: In 2003 interest rate were at their lowest and I assume that loads of mortgage approvals were given for people to get in at this low point. This probably increased the nearest we got to the rate rise (Nov?). I am sure (presuming again) that most of these were for a 2 year fixed. Also at the moment we have greater competition going on with mortgage lenders to get those elusive customers in a leaner market. So my question is:

Could this gradual rise in mortgage approvals over 2005 be people finishing their two year fixed and then going to a more competitive lender for the next loan? Hence another approval.

This would give higher approvals, but with a smaller turnover in houses bought. This would be fine with me.

I guess the warm feeling from the approval figures would make a homeowner want that extra two grand for their house.

Unfortunately I do not have any past figures to prove all this, although I have probably seen them here numerous times.

As mentioned this is only a theory, please feel free to shoot down or build up the arguement.

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Somone had posted a link to the Banking association press release the other day on here. If you take a look at the end of the report a table gives a detailed breakdown. Of the 150,000 or so approvals only about 1/3 were actually for house purchases, the rest were either remortaging or MEWing.

If you think about it, if due to existing credit card debt & personal loans you're credit rating is too low to get further unsecured loans the only option open to you is to put your house up as collateral and get a secured loan.

Falling credit card advances, but rising mortage advances, at the same time as a 14% drop in sales volumes is not a coincidence IMO it's a sign of credit distress.

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Quite a lot has been said about the apparant rise in asking prices (1.4% nationwide this month) and the support offered for this by rising mortgage approvals. This has made me a bit nervous lately. It seems everyone has an answer for disproving this and like a good old HPC'er I would like to throw one in that I have not seen here yet. Hopefully someone can help prove or disprove this arguement with some good old fashioned figures from years past.

The theory: In 2003 interest rate were at their lowest and I assume that loads of mortgage approvals were given for people to get in at this low point. This probably increased the nearest we got to the rate rise (Nov?). I am sure (presuming again) that most of these were for a 2 year fixed. Also at the moment we have greater competition going on with mortgage lenders to get those elusive customers in a leaner market. So my question is:

Could this gradual rise in mortgage approvals over 2005 be people finishing their two year fixed and then going to a more competitive lender for the next loan? Hence another approval.

This would give higher approvals, but with a smaller turnover in houses bought. This would be fine with me.

I guess the warm feeling from the approval figures would make a homeowner want that extra two grand for their house.

Unfortunately I do not have any past figures to prove all this, although I have probably seen them here numerous times.

As mentioned this is only a theory, please feel free to shoot down or build up the arguement.

If people got the initial deal through a mortgage broker then they would certainly be encouraged to take up a new deal at the end of the old one - it's how the brokers make their money. I think this would go into the overall figure for mortgage approvals but as we know a high proportion of these are remortgages. All this is on a thread somewhere and has been debated a lot. Sorry but I don't have time right now to locate it.

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Guest wrongmove

Could this gradual rise in mortgage approvals over 2005 be people finishing their two year fixed and then going to a more competitive lender for the next loan? Hence another approval.

The best approval figures for predicting future HPI are the Bank of England figures. They are just for house purchase, and exclude MEW and remortgaging. The approvals are recorded after the house house been valued by the lender, and agreed to loan the money to the buyer.

The BBA and CML figures come out earlier, and give some indication of the BoE figures, but they include remortgaging etc., so they are not such a good predictor of future house price movements.

Current levels of approvals for house purchase would suggest that HPI will approach double figures over the nexy 6 months. Approval levels are well above their long term trend. We (bears/FTBs) just have to hope that the relatively high stock levels should take of the sting out.

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Thanks for the replies.

Does anyone have the monthly approval figures for the last 3 years?

Hi the BOE figures are for house pruchase, ie after the surveyor has been round. They do not incule any remortgages

The current number is 122 (Which was up from 116 , int he month that SIPPS were suppose to vanish)

Here is a historic graph (note below 1993 it's the average per quater)

http://www.geocities.com/kingofnowhereiii/...provalgraph.GIF

Here is the nationwide HPI/Approvals

http://www.geocities.com/kingofnowhereiii/...I_Approvals.GIF

Would seem to indicate that if this level continues then HPI will hit 20%, personally I think that is a tad high

And heres one I did a while ago, (Oct IIRC) on the three monthly approval number and the halifax numbers.

http://www.geocities.com/kingofnowhereiii/...approvalHPI.GIF

It was then pointing to about 10% HPI

I trust that helps explain the mysteries of the approval numbers

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Another theory

My reasoning.

Based on:

Mortgage approvals are relatively high not MEW or remortgages.

FTB are quite relatively low, 7%.

Who is taking out these mortgages?

BTL ? A small percentage I would think as the profits are minimal with house prices so high.

Who is left? people moving up, this must make the majority of those in the market at this time.

Conclusion

People still want to move up to bigger better properties, they are putting in offers, which are being accepted,

mortgages are being applied for and approved, chains being formed all waiting for the unwary FTB

to come along and buy the property at the bottom of the chain.

So all this approved mortgage money is frozen until the FTB comes along to unlock it all, which is not happening

as low number of FTB.

Any good?

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Another theory

My reasoning.

Based on:

Mortgage approvals are relatively high not MEW or remortgages.

FTB are quite relatively low, 7%.

Who is taking out these mortgages?

BTL ? A small percentage I would think as the profits are minimal with house prices so high.

Who is left? people moving up, this must make the majority of those in the market at this time.

Conclusion

People still want to move up to bigger better properties, they are putting in offers, which are being accepted,

mortgages are being applied for and approved, chains being formed all waiting for the unwary FTB

to come along and buy the property at the bottom of the chain.

So all this approved mortgage money is frozen until the FTB comes along to unlock it all, which is not happening

as low number of FTB.

Any good?

Good for me. So, as this mass seizure takes place, the approvals should drop in coming months, as the FTBs are unlikely to be forthcoming. Unless prices drop considerably, in which case approvals may increase, or may fall further as all and sundry flee the market.

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Good for me. So, as this mass seizure takes place, the approvals should drop in coming months, as the FTBs are unlikely to be forthcoming. Unless prices drop considerably, in which case approvals may increase, or may fall further as all and sundry flee the market.

Or it could just build and build as more chains form, more mortgages approved and no FTB to allow the

process to complete.

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How many potenital SIPP buyers have now put their money away into a pension and are now left with an overhanging purchase - either off-plan or off the open market?

They will need finance. :D

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  • 335 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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