Saturday, October 30, 2010

The 2nd crash is rolling

Britain's property market in 'double-dip'

Britain’s property market is in the midst of a “double dip”, economists reveal, as figures show mortgage lending dropping to a tenth of the level seen during the previous month.

Posted by doomwatch @ 09:10 PM (2588 views)
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8 thoughts on “The 2nd crash is rolling

  • Am I missing something here or is the tag line to the article wrong! Since when has a fall in mortgage approvals of 26 from 47500 i.e. down to 47474 equated to a tenth?

    Is this another nail in the coffin of credible journalism.

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  • No the amount of money lent dropped to just one tenth of the previous months amount. I do wonder if someone is manipulating the market by taking out lots of very small home loans to make things look as if everything is peachy. An average home loan of 112m/47000 = ~2400 pounds doesn’t get you much of a house. Maybe half a shed if your lucky.

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  • Could these smaller mortgages be equity withdrawal ?

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  • mark wadsworth says:

    Chaps, what the article says is that NET lending has fallen a lot, which is a balancing figure between new mortgages (gross lending) and all the amounts repaid, redeemed etc.

    So for example…
    August net lending £1,620 million might have been gross lending £10,000 million minus £8.380 million repayments
    September net lending £112 million might have been gross lending £9,500 million minus £9.388 million repyaments

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  • Thanks Mark. I stand corrected (must have been the drink!). Average loan size was 110k (Sep 2010) and his been fairly consistent for the past few months: http://www.bankofengland.co.uk/statistics/li/current/index.htm. It sounds like the banks are only lending what is being paid back in. It kind of proves there is very little spare cash. From now on I would expect the number of loans to gradually increase as house prices fall.

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  • tenyearstogetmymoneyback says:

    A couple of relevant questions are :-

    I wonder how many of the repayments are due to people cashing in their savings (which are paying next to no interest)
    and using them to pay off the mortgage. Obviously, this won’t help the banks at all.

    How many people having paid off their mortgage will bother to save.
    In the current climate No savers = no mortgages

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  • mark wadsworth says:

    Tenyears, the main reason that people ‘save’ is because they fear or know that their income is going to fall in future, in particular ‘saving for your retirement’.

    It has to do with marginal uitility of consumption. Otherwise people would spend their entire wages in the first couple of days in the month! It stands to reason that you are happier by spending £60 a day for the whole month than blowing £1,800 on a luxury hotel room and several bottles of champagne and a few cigars on the first day and then couch surfing and living off beans for the next 29 or 30 days (or 27 or 28 in February).

    The interest rate paid on savings, tax breaks etc are more or less completely irrelevant.

    Which is why at the moment people are ‘saving’ a lot more than normal, i.e. paying off mortgages, spending less than they earn, not doing mortgage equity withdrawal etc etc.

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  • tenyearstogetmymoneyback says:

    Thanks for the reply Mark,

    By saving I was taking a rather narrow view, in thinking of people actually depositing money in the bank or building society.
    Interesting that there was a article on the radio news of a Which report which had come to the conclusion that savers were
    being ripped off, with the worst savings accounts paying just 0.01% interest.

    So the question is how will people react once they have paid off their debts and mortgage?
    In the past people would happily deposit money, with the knowledge that the interest would buy them a couple of bottles of Champagne
    or their favourite tipple. If people feel they are being ripped off they might behave differently.

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