Before we dive into the usual hyperbole that characterizes this blog, I thought it might be useful to take a longer term perspective on today's mortgage approvals data. The Bank of England website offers data going back to April 1993. Today's number - 64 thousand was the lowest in that admittedly limited data set. The previous lowest was 69 thousand back in June 1995.
So, today's number is bad. In fact, it is badder than bad. It is awful. Lenders have abandoned the market. In fact, there is a whiff of desperation in the air as one lender after another have tightened their lending conditions.
It is hard to overestimate the importance of the mortgage approvals number. While it is true that some houses are bought with cash, the housing market needs mortgages like the rest of us need air. If there is no credit, the housing market seizes up. That is what is happening right now across the UK.
How far will prices fall? I have a rather modest forecast. I reckon house prices will fall by around 9 percent from the peak within a twelve month period. After that, I expect them to fall further still. Over the medium term, a 20-30 percent drop seems reasonable, though I wouldn't be surprised to see prices fall even further.