Over the past few weeks there have been more and more positive stories, whether its been more cheerful estate agents or mortgage approvals and some indices have shown house prices stopping falling. This coupled with more daylight in the evenings and some decent weather has felt like we have stepped out of a very dark winter, blinking in the sunlight with a whole summer ahead of us.
Most of the UK are stakeholders in the property market or some kind, whether they work in the property sector, whether they own or whether they work for a bank which has a large exposure to the property market. The group of stakeholders who hold the property market in their hands is the banks. The market will live or die by their actions (or lack of them).
Todays figures show that mortgage lending by the UK's major banks fell for the first time in four months in March, squashing any thoughts of a spring housing market recovery. The number of mortgages approved for house purchases fell to 26,097 in March, down 6.8% from February and 25% lower than a year earlier. The British Bankers' Association, which produced the figures, said it expected fluctuations during a recession. worryingly it added that savers were also reluctant to make more deposits with interest rates low.
These figures should inject a bit more realism into the market, the positive news of the last month shows that in some areas things aren't getting worse and in some cases are improving, however the housing market has a long way to go before a sensible sustainable recovery starts.
Monday, April 27, 2009
Friday, April 24, 2009
Not so large loans....
Whilst we all poured through the budget looking for crumbs of comfort which would help our beleagured industry there is one aspect which will affect the mortgage industry indirectly.
Probably the most headline (and tax revenue) catching parts related to the hammering the Chancellor is giving to people earning more than £100,000 and especially those earning more than £150,000. These higher earners are going to have to start handing over a lot more of their incomes. Sadly this will mean they will have less of it to support mortgages. So I expect lenders which offer large loans to tweak their affordablity calculations in a rather scrouge like way. This will mean that there be less demand for higher priced properties. Another nail in the coffin.
Many thanks to Steve Smith of Brooks MacDonald who sent me the story below....
HOW THE UK TAX SYSTEM WORKS
Suppose that every day, ten men go out for beer and the bill for all ten comes to £100. If they paid their bill the way we pay our taxes, it would go something like this:
The first four men (the poorest) would pay nothing.
The fifth would pay £1.
The sixth would pay £3.
The seventh would pay £7.
The eighth would pay £12.
The ninth would pay £18.
The tenth man (the richest) would pay £59.
So, that's what they decided to do.
The ten men drank in the bar every day and seemed quite happy with the arrangement, until one day, the owner threw them a curve. 'Since you are all such good customers,' he said, 'I'm going to reduce the cost of your daily beer by £20.' Drinks for the ten now cost just £80.
The group still wanted to pay their bill the way we pay our taxes so the first four men were unaffected. They would still drink for free. But what about the other six men - the paying customers? How could they divide the £20 windfall so that everyone would get his 'fair share?'
They realized that £20 divided by six is £3.33. But if they subtracted that from everyone's share, then the fifth man and the sixth man would each end up being paid to drink his beer. So, the bar owner suggested that it would be fair to reduce each man's bill by roughly the same amount, and he proceeded to work out the amounts each should pay.
And so:
The fifth man, like the first four, now paid nothing (100% savings).
The sixth now paid £2 instead of £3 (33%savings).
The seventh now pay £5 instead of £7 (28%savings).
The eighth now paid £9 instead of £12 (25% savings).
The ninth now paid £14 instead of £18 (22% savings).
The tenth now paid £49 instead of £59 (16% savings).
Each of the six was better off than before. And the first four continued to drink for free. But once outside the restaurant, the men began to compare their savings.
'I only got a pound out of the £20,' declared the sixth man. He pointed to the tenth man, 'but he got £10!' 'Yes, that's right,' exclaimed the fifth man. 'I only saved a pound, too. It's unfair that he got ten times more than I did'. 'That's true!!' shouted the seventh man. 'Why should he get £10 back when I got only two? The wealthy get all the breaks'. 'Wait a minute,' yelled the first four men in unison. 'We didn't get anything at all. The system exploits the poor'
The nine men surrounded the tenth and beat him up.
The next night the tenth man didn't show up for drinks, so the nine sat down and had beers without him. But when it came time to pay the bill, they discovered something important. They didn't have enough money between all of them for even half of the bill. And that, ladies and gentlemen, journalists and college professors, is how our tax system works. The people who pay the highest taxes get the most benefit from a tax reduction. Tax them too much, attack them for being wealthy, and they just may not show up anymore. In fact, they might start drinking overseas where the atmosphere is somewhat friendlier.
Probably the most headline (and tax revenue) catching parts related to the hammering the Chancellor is giving to people earning more than £100,000 and especially those earning more than £150,000. These higher earners are going to have to start handing over a lot more of their incomes. Sadly this will mean they will have less of it to support mortgages. So I expect lenders which offer large loans to tweak their affordablity calculations in a rather scrouge like way. This will mean that there be less demand for higher priced properties. Another nail in the coffin.
Many thanks to Steve Smith of Brooks MacDonald who sent me the story below....
HOW THE UK TAX SYSTEM WORKS
Suppose that every day, ten men go out for beer and the bill for all ten comes to £100. If they paid their bill the way we pay our taxes, it would go something like this:
The first four men (the poorest) would pay nothing.
The fifth would pay £1.
The sixth would pay £3.
The seventh would pay £7.
The eighth would pay £12.
The ninth would pay £18.
The tenth man (the richest) would pay £59.
So, that's what they decided to do.
The ten men drank in the bar every day and seemed quite happy with the arrangement, until one day, the owner threw them a curve. 'Since you are all such good customers,' he said, 'I'm going to reduce the cost of your daily beer by £20.' Drinks for the ten now cost just £80.
The group still wanted to pay their bill the way we pay our taxes so the first four men were unaffected. They would still drink for free. But what about the other six men - the paying customers? How could they divide the £20 windfall so that everyone would get his 'fair share?'
They realized that £20 divided by six is £3.33. But if they subtracted that from everyone's share, then the fifth man and the sixth man would each end up being paid to drink his beer. So, the bar owner suggested that it would be fair to reduce each man's bill by roughly the same amount, and he proceeded to work out the amounts each should pay.
And so:
The fifth man, like the first four, now paid nothing (100% savings).
The sixth now paid £2 instead of £3 (33%savings).
The seventh now pay £5 instead of £7 (28%savings).
The eighth now paid £9 instead of £12 (25% savings).
The ninth now paid £14 instead of £18 (22% savings).
The tenth now paid £49 instead of £59 (16% savings).
Each of the six was better off than before. And the first four continued to drink for free. But once outside the restaurant, the men began to compare their savings.
'I only got a pound out of the £20,' declared the sixth man. He pointed to the tenth man, 'but he got £10!' 'Yes, that's right,' exclaimed the fifth man. 'I only saved a pound, too. It's unfair that he got ten times more than I did'. 'That's true!!' shouted the seventh man. 'Why should he get £10 back when I got only two? The wealthy get all the breaks'. 'Wait a minute,' yelled the first four men in unison. 'We didn't get anything at all. The system exploits the poor'
The nine men surrounded the tenth and beat him up.
The next night the tenth man didn't show up for drinks, so the nine sat down and had beers without him. But when it came time to pay the bill, they discovered something important. They didn't have enough money between all of them for even half of the bill. And that, ladies and gentlemen, journalists and college professors, is how our tax system works. The people who pay the highest taxes get the most benefit from a tax reduction. Tax them too much, attack them for being wealthy, and they just may not show up anymore. In fact, they might start drinking overseas where the atmosphere is somewhat friendlier.
Friday, April 3, 2009
Green shoots?
Here goes with my first blog....
For what feels like the first time in at least 12 months we have seen 2 pieces of good news within a couple of days.According to Mortgage Brain, the number of products has started to rise for the first time in 8 months. Personally i have never been a big fan of using product numbers to measure the health of the mortgage market. The vast majority of the products which disappeared were packager exclusives and as we know each packager used to have its own range. Northern Rock tended to have a huge range, its product guide (which used to change several times per week) would make the average Harry Potter book look short. At one point in 2007 i think it had 27 different 2 year fixed rates... so a reduction in the number of products was not necessarily a bad thing. MB's figures show the number of products has risen from 2731 to 3091. without knowing the breakdown of the increase more its hard to gauge whether this really is good news. but lets take it as such.
For a day or so a number of people drew false comfort from the fact that Nationwide had reported that the average price of a house had risen by £3,000. clearly that has to be good news doesn't it? well 1 day later Halifax reported that the price of the average house had fallen by 1.9%. so maybe not. I think its far to early to call the end of house price falls. Whilst there is plenty of interest from prospective buyers until there is a greater appetite from the lenders to lend, prices aren't going to stop going down. The chancellor may do his best to help in the budget, probably the quickest thing to do is to suspend stamp duty for a period. Based on the current paltry levels of stamp duty receipts it wouldn't be too expensive to do this. Well whats a billion or so when you are splashing out tens of even hundreds on the banks and the economy. With an election looming in a little over 12 months the government needs to try to do something to give itself a sniff of a chance of not being trounced. it realises the cornerstone of the UK is the housing market so we may well see a "Hail Mary" desperate attempt to do something to stop house prices falling sooner rather than later.
Whilst it may sound strange probably the best news of the week is that HSBC is going to start a pilot to allow John Charcol to offer whole of market advice in 20 of its branches. Clearly this is great news for John Charcol but it also is a huge change for HSBC which had always said it had no intention of dealing with brokers. This raises the interesting idea of other lenders products being sold in HSBC branches. Lets hope that this is a success and that HSBC expand the scheme to include other brokers.We aren't out of the woods yet but i would rather have 3 bits of good news in a week rather than an endless onslaught of bad news.. roll on next week.
For what feels like the first time in at least 12 months we have seen 2 pieces of good news within a couple of days.According to Mortgage Brain, the number of products has started to rise for the first time in 8 months. Personally i have never been a big fan of using product numbers to measure the health of the mortgage market. The vast majority of the products which disappeared were packager exclusives and as we know each packager used to have its own range. Northern Rock tended to have a huge range, its product guide (which used to change several times per week) would make the average Harry Potter book look short. At one point in 2007 i think it had 27 different 2 year fixed rates... so a reduction in the number of products was not necessarily a bad thing. MB's figures show the number of products has risen from 2731 to 3091. without knowing the breakdown of the increase more its hard to gauge whether this really is good news. but lets take it as such.
For a day or so a number of people drew false comfort from the fact that Nationwide had reported that the average price of a house had risen by £3,000. clearly that has to be good news doesn't it? well 1 day later Halifax reported that the price of the average house had fallen by 1.9%. so maybe not. I think its far to early to call the end of house price falls. Whilst there is plenty of interest from prospective buyers until there is a greater appetite from the lenders to lend, prices aren't going to stop going down. The chancellor may do his best to help in the budget, probably the quickest thing to do is to suspend stamp duty for a period. Based on the current paltry levels of stamp duty receipts it wouldn't be too expensive to do this. Well whats a billion or so when you are splashing out tens of even hundreds on the banks and the economy. With an election looming in a little over 12 months the government needs to try to do something to give itself a sniff of a chance of not being trounced. it realises the cornerstone of the UK is the housing market so we may well see a "Hail Mary" desperate attempt to do something to stop house prices falling sooner rather than later.
Whilst it may sound strange probably the best news of the week is that HSBC is going to start a pilot to allow John Charcol to offer whole of market advice in 20 of its branches. Clearly this is great news for John Charcol but it also is a huge change for HSBC which had always said it had no intention of dealing with brokers. This raises the interesting idea of other lenders products being sold in HSBC branches. Lets hope that this is a success and that HSBC expand the scheme to include other brokers.We aren't out of the woods yet but i would rather have 3 bits of good news in a week rather than an endless onslaught of bad news.. roll on next week.
Subscribe to:
Posts (Atom)
Posts
