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Correlation Between Mortgage Approvals And Price

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Trying to convince my mate that prices are doomed towards the end of the year.

Anyone got any correlations of Mortgage Approvals to Prices?

I understand mortgage approvals are a leading indicator of prices but would be good to see a graph with both on it. Can anyone help?? As the mortgages are so low should feed in to prices towards the end of the year??

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Trying to convince my mate that prices are doomed towards the end of the year.

Anyone got any correlations of Mortgage Approvals to Prices?

I understand mortgage approvals are a leading indicator of prices but would be good to see a graph with both on it. Can anyone help?? As the mortgages are so low should feed in to prices towards the end of the year??

There has been correlation on the way up, but that does not necessarily mean that there is correlation on the way down, and of course correlation doesn't always = causation.

I think that you can hypothesise that approvals are an early indicator of demand.

Unless the approvals numbers are because there are very few properties on the market, it is probably fair to say that it will have a downward pressure on prices.

And from looking at properties on RightMove, these are not in short supply.

edit to add.

Spline's site has graphs of this sort of thing. sorry spline, can't remember the url. :(

Edited by bobthe~

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Guest sillybear2
There has been correlation on the way up, but that does not necessarily mean that there is correlation on the way down, and of course correlation doesn't always = causation.

I think that you can hypothesise that approvals are an early indicator of demand.

Indeed, it's a function of volume, so it can mean two things, prices 'hold up' but volumes continue to tumble or prices fall with increased turn over, or a combination or the two.

Edited by sillybear2

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From April 1993 the correlation has been 0.42...

'Mortgage approvals & house prices':

http://stumblingandmumbling.typepad.com/st...use-prices.html

Since April 1993, the correlation between approvals and price inflation in the following 12 months has been 0.42, with an R-squared of 23.5%. The regression equation is:

Inflation = -14.01 + (22.97 x 100,000 approvals)

If this equation continues to hold - and this is always a big if when one variable is at a record low -- it points to prices falling 4.4% between now and May 2009.

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"The graph shows %YoY house price inflation against the BoE monthly approvals for house purchase numbers (in 1000s, SA, LPMVTVX) throughout the last price cycle. However, more recent figures for house price inflation are running slightly below those implied from the historic correlation."

http://www.houseprices.uk.net/articles/pro...y_transactions/

To quote from the above website. (Thanks spline)

So... transaction figures DO predict HPI (HPC).

But....better news...

..prices are now correlating LOWER THAN THEY WERE PREDICTED.

This means prices are crashing FASTER than they should for the mortgage approvals!

Good news.

Edit - current mortgage approvals (42 thousand I think) are SO LOW THEY'RE OFF THE GRAPH OF PRICE DROP PREDICTION!!! Try it yourself - put a ruler against the graph and put a dot against where 42K correlates... then take a bit more off because of what I done wrote above!

Timberrrrrr!

Edited by 29929BlackTuesday

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  • 399 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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