Friday, 23 November 2007

Mortgage approvals come crashing down

(Click on the chart)

This ship is sinking faster than anyone could have imagined. The housing market is about to slip under and sink to the abyss.

Today, the British Bankers Association announced that their members approved just 44,105 mortgages in October. That number is a staggering, bubble-bursting 37 percent lower than the same month last year. This is the fifth consecutive monthly fall in mortgage approvals.

However, the key takeaway from the BBA's press release is that this number is the lowest figure since the organisation started publishing numbers ten years ago.

The remortgage business was a little more active. Overall, 54,881 new loans were approved during the month. Even so, that number is down 17.1% down on October last year.

The iron law of housing has now started to apply - no mortgages approvals equals no effective demand for houses. When demand disappears, sellers are initially reluctant to cut prices, and housing inventory increases. Then the market enters into a long dark winter of low sales, declining prices and negative equity.

By next October, no one will understand why we believed that house prices could keep on increasing at 10 percent for ever.
(Many thanks to Tom, one of our blog readers, for the chart. Any help in tracking this unfolding financial disaster is always appreciated.)


tom said...

Hi Alice,

Here's a good graph - feel free to stick in your post:

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