Tuesday, August 24, 2010

Another serving of bear food

House price hopes dashed by mortgage approval slide

Another rehash of that press release "Hopes of a sustained recovery in house prices faded today after another slide in mortgage lending. UK banks approved 33,698 mortgages in July, down from 34,575 in June, the British Bankers' Association said. It was the second consecutive monthly fall and went some way to explaining why house prices have stagnated during the summer. A flood of properties coming onto the market at a time of weak demand has also taken its toll. George Buckley, chief UK economist at Deutsche Bank, said: “The housing market is moving sideways at the moment. Unless there is a pick up in mortgage lending, there will be no pick up in house prices. You need to see some rise in lending in order to produce a recovery in house prices and that is not forthcoming at the moment.”

Posted by mark wadsworth @ 01:26 PM (2262 views)
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20 thoughts on “Another serving of bear food

  • sibley's love child says:

    Larvely-jubbly; just e-mailed that to ‘er indoors – in particular this little bon mot:

    “Banks were approving between 70,000 and 80,000 mortgages a month before the housing boom turned to bust in 2007. Lending this year has hovered around 33,000-36,000 a month”.

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  • Bear food overload, must start diet…

    Seriously, is it just me or does it feel like the wheels are finally coming off this housing cart?

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  • Headline should read “House price hopes HELPED by mortgage approval slide”

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  • @Mr Flibble “is it just me or does it feel like the wheels are finally coming off this housing cart?”

    Yes they are, people are now beginning to experience a reality check.

    Hopefully the same will happen to the celeb culture, which is poisoning the UK, before much longer. I realised how crazy this is becoming when 2 out of the 3 national “red top” tabloids’ front page headlines recently were about Cheryl Cole rather than general news. I appreciate that these papers may be the “gutter press” but surely the obsession with self serving celebs is wrong? Before anyone comments, I know, no connection to HPC.

    I don’t read the Sun and Star by the way, the headlines simply caught my eye!

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  • mark wadsworth says:

    SLC, Mr F, this looks like the next big downwards lurch to me.

    TT, that depends which side of the fence you are – don’t forget that well over half the population own homes and think that rising values make them richer 🙁

    PS, proper economics looks at actual facts and says “House prices at any point in time are a function of mortgage lending and have little to do with underlying value in absolute terms” as well as the general rule that “Inflation is bad, or at least the symptom of something bad (such as artificial shortages)”.

    Home-Owner-Ist economics not only says that some kinds of inflation are good (without ever explaining why) but also sees current house prices as an absolute (ignoring the fact that ten years ago they were worth maybe half as much), with the banks, FTBs, BOMAD and the taxpayer generally honour bound to prop them up by bridging the gap between what the HOs would like their house to be worth and what it really is worth.

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  • sibley's love child says:

    I like to think so MW, although I do find myself having to indulge in a spot of the house-viewing sport this weekend so i’m not in the clear just yet…on the other hand, it is one of the three Ds (divorce) so who knows.

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  • 7. uncle tom said…Even the BBC seems to have given up trying to put a positive spin on the market..

    I think it is an orchestrated shift in attitude since the glubberment changed. I am convinced that Jow public is being softened up for the big fall. I even think an event is being engineered to up interest rates.

    Yes, hope is all I have left. Looking at a plot at the moment for 470,000. Need something big to happen. And QUICK!!

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  • Echo all the above. Just days to go until the latest round of monthly house price surveys are out. Could be a very interesting time!

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  • 1. sibley’s love child said…

    Larvely-jubbly; just e-mailed that to ‘er indoors – in particular this little bon mot:

    “Banks were approving between 70,000 and 80,000 mortgages a month before the housing boom turned to bust in 2007. Lending this year has hovered around 33,000-36,000 a month”

    I think the tie in with the banks’ balance sheets will ensure that there is everything that is possible to avoid a crash – the figures are too colossal. I’m disappointed that no-one paid the price of their failure in their duty of care to avoid moral hazard……but it seems like business as usual now. My guess is low numbers of sales for a while, then a bit of inflation for a while – then a return to ‘normal’.
    Every year that goes by, and the BTL scam fades in the memory…..can’t see massive defaults being allowed. I’m in the ‘get on with your life and buy if you can camp now,, regrettably.
    Neo-feudalism rules, and no Party cares, or dare express sympathy with the priced out young people with no BOMAD account. I feel for them.

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  • mark wadsworth says:

    Braindeed, the figures aren’t actually that colossal.

    If nominal house prices fell 40%, the amount of nequity in this country would be about £150 billion or something. Most people with jobs will grit their teeth and keep paying, some will default. So maybe banks end up out of pocket by £50 billion. As the banks owe the taxpayer about £300 billion (which will never be repaid), the government can just formally waive £50 billion or even £100 billion to cover the banks’ losses and that is the end of that.

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  • sibley's love child says:

    True Braindeed, I am also of the same mindset however there seems to be some problem with the ‘buy if you can’ ethos; as evidenced by the woeful approvals. If people (in general) can’t afford to buy, and there seems little hope of wage inflation – I can only see one logical outcome.

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  • Wadsworth, 40%!, you have a severe case of phantasm, or is that phant-ism.

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  • MW @10…

    My perception is thus.

    The £300bn underwrite was notional – it did not represent ‘cash’ or ‘money’ – it was an illusionary tactic to suggest that, if all else failed the UK taxpayer would effectively ‘own’ the balance sheet debts. Interim the taxpayer services that notional debt, but as we see the bank continued trading, the confidence factor returned in the style of Jimmy Stewarts ‘It’s a wonderful life’…..and the Banks continue as if nothing happened, except they develope a new respect for the concept of ‘Moral Hazard’.
    Personally, I think old Broon will go down as a genius, a few generations on from this time (please disagree-ers….it’s just an opinion, don’t vex youselves) – with a place that ranks alongside Franklin D’s New Deal.
    I fully expect this Coalition to benefit from Broon’s actions, in much the same way as Blair rode the Fiscal joys of Lamont’s tactics.

    IMO The danger of BTL defualt represents massive true write-downs by scammers unable to ‘grit-their-teeth’ on entire ‘portfolios’ (I hate the damm word) – that would be a maega scare. They got away with it, I’m afraid (the early one’s, I mean – I’m still hopeful that the Johnny come latelys have their bumfluff singed with a blowlamp)

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  • Smugdog,

    40% is quite a modest assumption – basic affordability analysis suggests that prices can’t stabilise at above that level, and even then it requires an imprudent level of debt burden.

    The price correction is very likely to overshoot – as no-one likes to catch a falling knife – and then rebound. The rebound might over-reach a little before settling back.

    In real terms, I doubt house prices will finally settle at much above half their current level.

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  • UT @14

    In real terms, I doubt house prices will finally settle at much above half their current level.

    That would be just….I can’t see it being allowed to happen, though.
    And I know you’d argue the market will decide, but we don’t have a free market, do we?

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  • Smugdog represents the majority view, useful to have a housedog sometimes…..good boy 🙂

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  • “I can’t see it being allowed to happen, though”

    No-one can stop it. The market is bigger than the govt can control.

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  • ‘A flood of properties coming onto the market at a time of weak demand has also taken its toll.’

    Err.. Is this really ‘a time of weak demand’!!! Or just that the product being offered is vastly over-priced?

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  • mark wadsworth says:

    Markj69, that’s a good point – can we have “weak demand” and “pent up demand” at the same time?

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