Wednesday, 2 April 2008
Mortgage approvals come crashing down
(click on the chart for a sharper image)
It does not matter whether you look at seasonally adjusted or non-seasonally adjusted data, mortgage approvals in February are down relative to last year. The seasonally adjusted data is down 37 percent, while the non seasonally adjusted number is down about 33 percent. Nevertheless, I thought it useful to plot both series just in case there was any confusion amount the calamitous decline in mortgage availability.
Looking forward, there is little prospect of a recovery in mortgage volumes. Over the last couple of weeks, many mortgage providers have announced the withdrawal of their flagship mortgage products. Interbank lending conditions are terrible, and many smaller banks are finding it difficult to borrow on the wholesale market. Interbank interest rate spreads are actually rising, and credit conditions could again be deteriorating.
Remember the golden rule of real estate - credit availability determines house prices. With credit tightening, house prices can only fall.