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Boe Mortgage Approvals 115k

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Guest wrongmove

March approvals at 115k (SA), down from 122k in Feb (does not include MEW or remortgaging).

Well, at least they are down a bit from last month. Still strong though. Historically, anything over 90k tends to lead to positive HPI 6 months later.

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More interesting in the 9:30 data today is the current account deficit growing to 11bn from 10.2bn with a big upward revision to the previous month. This was actually expected to fall quite sharply this month and should put £ under pressure especially in the context of US rates.

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March approvals at 115k (SA), down from 122k in Feb (does not include MEW or remortgaging).

Well, at least they are down a bit from last month. Still strong though. Historically, anything over 90k tends to lead to positive HPI 6 months later.

Hi Wrong move

You are right, slightly down but still strong.

115K compares to an average since Jan 2000 of 106K (and these are really the boom years , or 97K since April 1993.

+'ve HPI still to come.

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Hi Kingofnowhere

But to sustain the boom, wouldn't mortgage approvals need to increase proportionately along with house prices? ie house prices double therefore an FTB needs to borrow double (ignoring deposit) the amount to buy the same house over the same timeframe.

If average house prices are say 100K and mortgage lending of 90B cause +ve HPI

then surely with average prices at 200K lending of 90B would not have the same effect.

C.P.

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Hi Kingofnowhere

But to sustain the boom, wouldn't mortgage approvals need to increase proportionately along with house prices? ie house prices double therefore an FTB needs to borrow double (ignoring deposit) the amount to buy the same house over the same timeframe.

If average house prices are say 100K and mortgage lending of 90B cause +ve HPI

then surely with average prices at 200K lending of 90B would not have the same effect.

C.P.

That's a very good point indeed. Surely, the monthly figures need to be indexed to house prices in order to be meaningful?

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Hi Kingofnowhere

But to sustain the boom, wouldn't mortgage approvals need to increase proportionately along with house prices? ie house prices double therefore an FTB needs to borrow double (ignoring deposit) the amount to buy the same house over the same timeframe.

If average house prices are say 100K and mortgage lending of 90B cause +ve HPI

then surely with average prices at 200K lending of 90B would not have the same effect.

C.P.

The mortgage approval data is merely the number of mortgages approved in the month are now ready to buy, it doesn't reference the size of that approval at all. Clearly the size of these approvals will be considerably bigger than similar approvals pre-boom.

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Hi Kingofnowhere

But to sustain the boom, wouldn't mortgage approvals need to increase proportionately along with house prices? ie house prices double therefore an FTB needs to borrow double (ignoring deposit) the amount to buy the same house over the same timeframe.

If average house prices are say 100K and mortgage lending of 90B cause +ve HPI

then surely with average prices at 200K lending of 90B would not have the same effect.

C.P.

Hi Cornish

This is happening which is why the average mortgage is increasing, and secured debt continues to rise.

If you think the average house changes hands only once every 15 years. Then if prices stay flat from now on, it will take fifteen years before the secued lending to catch up (although it would largely have caught up after seven years)

FWIW here is the BBA average approval size

1999	Av advanceoct	£69,800nov 	£72,400dec	£70,8002000	jan	£66,100feb 	£67,300mar	£69,400apr	£68,100may 	£68,200june 	£67,500july 	£66,400Aug	£66,800sept	£67,100oct 	£68,300Nov	£70,900Dec	£73,5002001	jan	£71,300feb 	£74,400mar	£76,300apr	£75,800may 	£76,100june 	£78,100july 	£77,900Aug	£76,500sept	£76,000oct 	£75,600Nov	£79,200Dec	£80,4002002	jan	£79,900feb 	£82,400mar	£84,800apr	£86,200may 	£89,000june 	£90,900july 	£89,300Aug	£88,000sept	£86,900oct 	£89,500Nov	£91,200Dec	£90,3002003	jan	£86,900feb 	£84,300mar	£85,600apr	£88,600may 	£92,100june 	£100,000july 	£102,200Aug	£105,300sept	£105,700oct 	£109,000Nov	£106,800Dec	£107,3002004	jan	£100,800feb 	£104,900mar	£109,200apr	£110,800may 	£113,900june 	£116,500july 	£114,200Aug	£112,100sept	£111,300oct 	£113,100Nov	£120,100Dec	£118,1002005	Jan	£113,900Feb	£123,300Mar	£127,200April	£129,900May	£125,400June 	£131,600july 	£132,700Aug	£130,500Sept	£130,500Oct	£129,500Nov	£130,800Dec	£134,4002006	jan	£126,800Feb	£132,300

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Guest wrongmove

Cheers Spline, if you have the data, could you plot SA mortgage approvals against HPI ? Or better still, against HPI six or nine months later. The correlation is very strong.

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Cheers Spline, if you have the data, could you plot SA mortgage approvals against HPI ? Or better still, against HPI six or nine months later. The correlation is very strong.

Hi wrongmove – I was thinking of doing that, but instead will shamelessly nick KoN’s excellent graph posted yesterday

Original thread, KoN: http://www.housepricecrash.co.uk/forum/ind...ndpost&p=332937

Repost of Kingofnowhere's hpi-approvals graph, particularly nice as it shows the lagged HPI response and the very tight correlation with approvals: :)

sgspja.jpg

Edited by spline

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Guest wrongmove

Thanks Spline - I missed that post yesterday. No prizes for guessing where HPI is headed over the next few months. We (bears, FTBs) need a sharp drop in approvals, and soon.

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Yes, the tiny SA dip in Feb is completely inconsequential compared with the eye-popping level of implied HPI already in the pipeline :o – obviously some caution is required because it relies somewhat on the reliability of the largish SA corrections but interesting nevertheless.

Edited by spline

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Monthly mortgage approvals, BoE Table A5.4 extended with the recent Feb 115,000 SA and estimated 100,000 NSA (reuse the Feb 2005 +15% SA)

sgse9v.jpg

Source: BoE Monetary & Financial Statistics, February 2006, A5.4

http://www.bankofengland.co.uk/statistics/...6/Feb/index.htm

Hi Spline

If you want the numbers as soon as they are out, 9.30 go to the BOE site, get to the interactive stats data base. And the codes for Approvals for house pruchase NSA and SA are LPMVTVU LPMVTVX

Saves trying to get the SA right, as it changes all the time . It uses Arima X-12 to automatically calculate the SA, which is always the pain in trying to get their SA numbers right.

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Guest wrongmove

Yes, the tiny SA dip in Feb is completely inconsequential compared with the eye-popping level of implied HPI already in the pipeline :o – obviously some caution is required because it relies somewhat on the reliability of the largish SA corrections but interesting nevertheless.

Yes, HPI would actually be expected to be higher than it is now. The explanation for this is that there was a lot of unsold stock on EAs books due to last years mini-slump, according to some.

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Thanks Kingofnowhere, that’s really useful, much more up-to-date and shows that they’ve revised the Feb SA up very slightly – I’d expected their X11 method to estimate the most recent SA by recycling the one from last year while, of course, altering *that* one in the process. :)

But the approval rate run through the graph seems to imply a rather strong HPI in the pipeline?

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Thanks Kingofnowhere, that’s really useful, much more up-to-date and shows that they’ve revised the Feb SA up very slightly – I’d expected their X11 method to estimate the most recent SA by recycling the one from last year while, of course, altering *that* one in the process. :)

But the approval rate run through the graph seems to imply a rather strong HPI in the pipeline?

Hi

Yep, approvals are indicating strong HPI (although it doesn't allow for the levels of stock and afffordability), Rics Sales to stock is anothe good measure and that at 35 is indicates just over 2% HPI per quarter. So indicating a YoY number end of 2006 of about 8-9%.

Personally I think some of the approvals are from "pent up" demand from last year so I expect them to slide down to about 100K by the end of the year with the average of 105/110K per month this year.

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Guest wrongmove

Hi

Yep, approvals are indicating strong HPI (although it doesn't allow for the levels of stock and afffordability), Rics Sales to stock is anothe good measure and that at 35 is indicates just over 2% HPI per quarter. So indicating a YoY number end of 2006 of about 8-9%.

Personally I think some of the approvals are from "pent up" demand from last year so I expect them to slide down to about 100K by the end of the year with the average of 105/110K per month this year.

As an FTB, I am glad to hear this - you have called the numbers pretty well up to now. So you think that 2006 is looking to be a "normal to slightly lively" year, with HPI somewhat above wage inflation ?

KoN - do you have a view on the medium term future of IRs in UK ?

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As an FTB, I am glad to hear this - you have called the numbers pretty well up to now. So you think that 2006 is looking to be a "normal to slightly lively" year, with HPI somewhat above wage inflation ?

KoN - do you have a view on the medium term future of IRs in UK ?

Hi Wrongmove

I have a view, and that is if anything the next move will be down, but I'm expecting them to stay flat for a while yet. Maybe a cut late this year or next.

Why

1) GDP is growing below trend

2) Shops are having a hard time

3) unemployment is rising

4) wage pressures are very muted (3.5% and the BOE have said in the past up to 4.5% would be consistant with 2% CPI)

5) There is an output gap, form 2005

6) Inflation is on target, and I expect it to fall below target in the medium term (although it looks like gas may spike it soon)

7) The world is getting near it's peak rates and then world rates will start to fall (Expect fed to have one and probably two more rises and that's about it)

So when it becomes obvious to the BOE that inflation pressures have not occured, and growth is below expectations then I expect a cut.

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Guest wrongmove

Cheers KoN - you don't think that Bernanke has any surprises up his sleeve then ? I mean, the pound has really taken a hammering today ;)

Oh well, if you are right, it looks like I'm down to bird flu or meteorite strikes then :)

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Cheers KoN - you don't think that Bernanke has any surprises up his sleeve then ? I mean, the pound has really taken a hammering today ;)

Oh well, if you are right, it looks like I'm down to bird flu or meteorite strikes then :)

hi

Nope I don't think there are many surprises.

anyway the pound might be taking a hmmering, but the pass through rate of inflation from oil/exchange rates has reduced. This was written in 2002 by Dr Sushil B Wadhwani, who was on the MPC then. And it correctly predicted that if oil rose then it wouldn't pass through to the inflation measures to the same degree as before, and he makes the same claims for exchange rates

http://www.bankofengland.co.uk/publication...2/speech171.pdf

Bird flu kills the young and fit BTW, like the 1918 Flu (There imune systems attack it to efficiently and end up killing the victims lungs. Whereas older people, and less fit end up attacking it slower and so don't kill themselves)

"The strain was unusual in killing many young and healthy victims, unlike common influenzas which killed mostly newborns and the old and infirm. People without symptoms could be struck suddenly and within hours be too feeble to walk; many died the next day"

http://en.wikipedia.org/wiki/Spanish_Flu

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Guest wrongmove

Thanks again KoN - I wasn't really serious about the pound or bird flu, but the links are interesting anyway.

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Good thread this, worth bumping back to the top.

From my own research on mortgage approvals and the link to rising prices, then I think the time lag is can be quite short i.e. just a couple of months.

Therefore, as soon as approval numbers drop, then very rapidly house price rises stop. Although the annual figures for HPI naturally take some time to be affected.

My own thoughts are that at the moment, HPI won't rise as fast as 8% this year - more like 3% in line with wages growth.

It will be interesting to see which way March pans out, I think this will give an indication for the rest of the year. March is normally a very strong month, spring bounce and all that. My only other thought is that March may be slower than normally, just purely as a result of the cold weather in March. However, its now warmed up and the suns out, so April may well be busier than normal to compensate.

We may have to wait until May before we can see the true picture. The only thing that can be said with any certainty is that there is no price crash happening.

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Guest

So when it becomes obvious to the BOE that inflation pressures have not occured, and growth is below expectations then I expect a cut.

They cut throughout the last recession. They'll cut through this one.

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I find it incredible that people that spout on here about the economy etc think the figure for mortgage approvals is a measure of the average size of a mortgage!!!!

I mean, for heaven's sake.

Anyway - 115,000 approvals in a month equates to 1,380,000 house sales a year. That equates to a bumper year. House sales even in the boom years were rarely above 1,250,000 a year.

What House Price Crash? Instead of crashing, the thing is taking off without you.

If you are priced out of the market - what are you going to do about it? Get down on your knees?

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