Tuesday, December 23, 2008

Mortgage approvals - the decline continues

Today, the British Bankers Association published their November mortgage approvals data. The data still has the power to shock. In November, banks approved only 17 thousand loans. Before the credit crunch, the banks were approving over three times that number.

We are now almost 18 months into the credit crunch, and despite bank rescues, negative interest rates, and government guarantees, nothing has revived the lending business. The reason isn't to hard to find; the mortgage securitization business is dead. When it died, it killed the mortgage lending business.

So, the UK housing crash continues. How far will prices fall next year? I reckon we are looking at another 10 percent decline by end-2009.

18 comments:

  1. Dear Alice,

    A 10 percent decline next year?
    Does that include the Sterling/Euro depreciation?


    I expect a 20 percent deline next year(not including the depreciation of the Sterling).

    Rambo

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  2. I also expect a big decline - I guess down 20% from where we are now at the very least.
    The rate of decline will accelerate in line with unemployment and insolvencies.
    The "bail out everyone and anyone" will end as the money becomes tighter and people's focus will be on survival and NOT on property speculation.

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  3. Bail out everyone?

    You mean the rich and powerful.

    Rambo

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  4. I'm no economist but what can stop the decline? if its just confidence then until brown and his clowns depart nothing will change.
    we cant sell anything,North sea oil is nearly gone,coal is allegedly killing the planet.
    What can stop this decline?

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  5. In The Long Run We are All Dead -

    JM Keynes

    Rambo

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  6. Which is why Keynes proposed mortgaging the future to pacify current voters. That guy was a destroyer of worlds.

    I reckon house prices down 20% minimum in 2009. No lending.No confidence and the defaults haven't really bitten yet.

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  7. How does this level of loans compare historically? Have we just gone back to a more 'normal' pre-bubble level of mortgage activity, or is this low by the standards of the last 30 years?

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  8. http://www.timesonline.co.uk/tol/money/property_and_mortgages/article5389051.ece

    Let's hope this doesn't become normal practice.

    There can't be another house boom. The underlying factors which caused the last one (apart from overcrowding) are all but gone. And overcrowding does not a wealthy country make.

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  9. Merry Xmas to you.

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  10. Although the recession started a year ago for some, the recession is only just -really- starting now. Given how bad 2009 will be, I expect the main impact to be in a decline of transactions. I don't think we have seen the proper start of the housing crash yet. The foam has been blown off the top of the beer is all.
    2009 will be the -beginning- of the -forced- sellers. That will not just be 20% down. How many closing down sales have "20% off" signs in the window? None. We are looking at a decade of poverty in the UK, this knowledge is spreading among the population. Not everybody can get out of housing positions, so I personally think 2009 will be utter bloodshed and slaughter, so very very bad we can't currently imagine.
    House prices are going to absolutely flatline. Nobody will want to buy, and nobody will be able to borrow...
    Freefall is what I expect. No parachute.

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  11. Although the recession started a year ago for some, the recession is only just -really- starting now. Given how bad 2009 will be, I expect the main impact to be in a decline of transactions. I don't think we have seen the proper start of the housing crash yet. The foam has been blown off the top of the beer is all.
    2009 will be the -beginning- of the -forced- sellers. That will not just be 20% down. How many closing down sales have "20% off" signs in the window? None. We are looking at a decade of poverty in the UK, this knowledge is spreading among the population. Not everybody can get out of housing positions, so I personally think 2009 will be utter bloodshed and slaughter, so very very bad we can't currently imagine.
    House prices are going to absolutely flatline. Nobody will want to buy, and nobody will be able to borrow...
    Freefall is what I expect. No parachute.

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  12. Alice, the stats are comparing this November to the same time last year, however the credit crunch was already upon us by then so perhaps comparing with 2004 would would more accurate in understanding this post bubble world.



    Chefdave

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  13. Apologies, using my sister's laptop and didn't realise she had a blogger account!

    Chefdave.

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  14. Banks don't want to bear more risk under housing price drop and unemployment rate increase in UK ~

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  15. I would have thought that the amount of bust would be negatively equal to the amount of boom. If you include the tinkering with interest rates which occurred at the time of the dotcom bubble then you are looking at about a total of 50% from peak. I believe that this would be correct at a time when it was just a recession that was causing price correction. However the sword of Damocles that is the derivatives hanging over the world economy - the era of expensive energy beckons and the baby boomer generation insist on living long lives and using up resources - then I think that eventually a new sustainable economy will be borne of this turmoil.

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  16. The overall amount of credit is down by two thirds; the number of mortgages is down by two thirds; mortgage lending is down by two thirds. It follows - oh my goodness - that the economy has to contract by two thirds and the real housing price - say take out the RPI - has to go down by two thirds, or very nearly twop thirds.

    It will probably stop falling when its between 55% and 60% down, with a slight gain over the 93-96 bottom, in c. 2015-2018.

    We are heading into an absolutely bloody recession. Definitely another 20% off huouse prices in 2009.

    Crime will sky-rocket; please God let the home secretary raise the number of police by a third and let them do their job properly before gangs rule large parts of our cities with impunity and there is no effective proection of property.

    Alternatively: buy dollars and move to Colorado, say Pueblo where you can buy a house for $100,000 and where it's legal to protect yourself.

    B. in C.

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  17. It's true that MBS are no longer alive and that killed the mortgage industry. That should be worth at least another 20%!

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