Mortgage approvals month by month from thhe start of the credit crunch
Is mortgage lending set to break out of the narrow range it has been stuck in since early 2008? The latest data from the Bank of England on mortgage approvals is looking better than some suggest.
Mortgage approvals rise
Just to recap, mortgage approvals have been hovering around 50,000 a month since mid-2009 and have not exceeded 60,000 a month since March 2008 before the onset of the credit crunch. The attached chart shows monthly approvals since the start of 2008.
According to the Bank of England, approvals rose about 3.5% from February to March this year. You can see the original data here.
But changes from one month to the next don’t take in to account seasonal changes in the Property market. Comparing approvals this year with the same time last year helps to avoid seasonal distortions.
On that basis, mortgage approvals in March were up around 7% compared to the same time last year. Moreover, the increase between March this year and 2012 is larger than the 5% increase between February 2012 and this year.
True, lending in January this year was lower than in 2012, but the results for January last year were unexpectedly high and may be an anomaly. Even allowing for that fall in approvals this January, overall approvals in the first quarter of the year are ahead of the same time last year.
More mortgages = more sales
That would be consistent with recent news of more sales. The Registers of Scotland reported earlier this week that sales to March year were 5% up on the same period last year. Data from GSPC member firms for April suggests that that trend is accelerating.
But what are the chances of a reversal?
But we have been here before. Approvals looked like they were growing strongly at the end of 2009, only to go in to reverse the following year.
The same happened in 2011 when a gradual recovery in approvals in the second half of the year peaked the following January and then went in to reverse.
Is there any reason to believe that this time might be different?
Possibly. Bank lending as a whole has been hugely influenced by events in the Eurozone. UK lenders prepared themselves for potentially huge losses in Europe by holding on to all the money they had.
When the Euro crisis reared its very ugly head again in 2012, mortgage lending in the UK shriveled as a result. That only came to an end when European central Bank’s Governor, Mario Draghi, said the bank would ‘do whatever it takes to save the Euro’. That commitment brought to an end – at least for the time being – fears that a major European economy would crash out of the Eurozone and trigger a potentially huge recession.
So, the chances of another Eurozone crises derailing lending in the UK are much lower than they were.
Shortly thereafter, the UK government launched Funding for Lending which offered banks cheap money as long as they lent it out. That scheme has now been extended to 2015, albeit with greater incentives to lend more to businesses rather than home owners. Nevertheless, it should mean that banks can raise the funds to lend if they want to.
Both of those factors suggest that we are far less likely to see a reversal in lending this year.
What to look out for
If mortgage approvals reach 56,000 or more for April, that would that would suggest that the current growth in lending is being sustained. If it is above that, the recovery is accelerating. If it is below that level, then growth is moderating.
There is a bewildering array of reports on mortgage lending. The British Bankers Association (BBA), the Council of Mortgage Lenders (CML) and the Building Societies Association (BSA) all issue regular reports on mortgage lending by their members.
But I prefer to use the data from Bank of England, for two reasons.
Firstly, the changing market share in mortgage lending between the building societies and the banks means that you can’t know whether a change in lending reported by them is down to a change in their market share or actually reflects overall market trends. Castle Trust reports that building society mortgage approvals now account for 29% of total approvals, compared with just 16% after the credit crunch. An increase in approvals reported by building societies might, therefore, be the result of an increase in their share of total lending rather than an increase in lending as a whole. Equally, a decline in approvals reported by the banks might be no more than a loss of market share rather than a fall in overall lending.
Secondly, the Bank of England results are based on what lenders tell them about loans that they have approved – even if the money hasn’t been handed over yet. In other words, the figures are a forward indicator of what is likely to be lent in future rather than what was lent last month.
Getting the best from your agent – #1
The first in a series of occasional tips on how to get the best out of your estate agent.
Many years ago, one of my first jobs was selling encyclopedias door to door*. I was very bad at it. Why? Because I didn’t think what I was selling was worth the money.
On a smaller scale, the same is true of selling houses. Selling agents are, despite claims to the contrary, human and the old truism that first impressions count applies to them just as much as it does to buyers. Your agent will be most enthusiastic and most persuasive if his or her first impression of your home is a good one.
So, tip number one for a successful sale is to treat your agent as if he or she was a buyer.
When you ask one or more selling agents round to give you a valuation (you can ask GSPC for a free valuation here), don’t leave all those little home improvements you are planning to do before your house goes on to the market until later. Do them now.
Of course, any agent worth his or her salt will do the best he or she can. But there is a world of difference between saying ‘I’ll tidy that up by the time we have viewers round’ and having it done already. To really get your chosen agent on board and fired up, treat the valuation as if it was a real viewing.
A note of caution, however. I’m not suggesting that you spend large amounts of money on home improvements. As I have mentioned before, home improvements can easily cost more than they add to the value of your home.
So, don’t splash out on a new bathroom or a new kitchen before you get a valuation done. But do make sure work surfaces are clear, bathrooms and kitchens are spotless, bedrooms are made, bins emptied, floors cleaned, weeds killed (if you have a garden) and gutters cleared.
By all means ask your agent for advice on other home improvements you might make to increase the value or appeal of your home. But only after you have done all you can with a vacuum, some cleaning tools and some elbow grease – before your agent evens sees your home.
*Just in case you are wondering, other early jobs included zoo keeper, shop assistant, barman, swimming pool attendant, bulletin writer for radio and shipping broker (estate agency for cargo ships).