Rate of Mortgage lending *growth* at lowest level

asdasd

From the Indo: Link here.

The bank says the growth in mortgage lending last year was 5.8%, the lowest increase since 1986.

What? Surely we would expect a decline in mortgage lending growth at this stage, not a lower increase? That figure means that debt as a percentage of GDP is still increasing as it was during the boom.

Économiste Monétaire

It means the y-on-y increase, from December '07 to December '08, was 5.8%. Mortgage lending, adjusted for securitisation, has remained around the 147bn level since September. The annualised rate of growth in mortgages has fallen from 12.8% January. Another amusing figure is the extra 200mn spent on personal credit cards in December, with outstanding personal CC debt at nearly 3bn.

Edit: I just noticed that the Indo confused new CC spending, with outstanding debt... :rolleyes:

asdasd

It means the y-on-y increase, from December '07 to December '08, was 5.8%

i understand. However I thought

1) The amount and number of housing transactions in the market stalled.
2) Prices fell.

So why, I am asking, did mortgage growth not go negative?

EDIT: I assume it will.

Time Magazine

asdasd wrote: »

i understand. However I thought

1) The amount and number of housing transactions in the market stalled.
2) Prices fell.

So why, I am asking, did mortgage growth not go negative?

EDIT: I assume it will.

I love the smell of a second derivative in the morning.

Économiste Monétaire

I guess you need to consider that the debt built up to late 2007 is still there. People who are selling their homes still hold that burden, and the people that are buying from them are taking out new loans, compounding the debt further. It could be that the debt level is increasing, nominally, as the sale of the home isn't paying off the full amount so people bare the old loan, somewhat, and a new loan. I hope that makes sense... I'm sure there are other scenarios, like people selling the homes of relatives to first time buyers, turning a house that had no debt, into a designated mortgaged home.

It's probably worth looking at the recent monthly increases, and annualising that rate.

P. Breathnach

Économiste Monétaire wrote: »

I guess you need to consider that the debt built up to late 2007 is still there. People who are selling their homes still hold that burden, and the people that are buying from them are taking out new loans, compounding the debt further. It could be that the debt level is increasing, nominally, as the sale of the home isn't paying off the full amount so people bare the old loan, somewhat, and a new loan. I hope that makes sense...

Hang on a moment: are you suggesting that if I have a mortgage of €250,000, sell the property and net €200,000, and end up owing the bank €50,000 it is still counted as "mortgage", even though it is no longer secured by a deed of mortgage?

Économiste Monétaire

P. Breathnach wrote: »

Hang on a moment: are you suggesting that if I have a mortgage of €250,000, sell the property and net €200,000, and end up owing the bank €50,000 it is still counted as "mortgage", even though it is no longer secured by a deed of mortgage?

It's just how they technically assign lending & categories; a loan for the purpose of purchasing a residential property. I've posted before somewhere about how the CBFSAI aggregates lending. It's just one theory floating around my head, not a coverall explanation.

SkepticOne

asdasd wrote: »

i understand. However I thought

1) The amount and number of housing transactions in the market stalled.
2) Prices fell.

So why, I am asking, did mortgage growth not go negative?

EDIT: I assume it will.

The reason for the overall increase is because, despite the current downturn in prices and transactions, prices are still high compared to, say, the 80's and early 90'. If a house from this era is sold then there's an increase in debt involved in the transaction, assuming a) the new buyer has taken out a mortgage for most of the price and b) the seller hasn't remortgaged but has paid off in full or in large part his outstanding mortgage.

I think the thing that people overlook is the fact that the seller pocketing the cash does not have a negative impact on the overall figure, only the amount he uses to pay off his mortgage which might be quite small or fully paid off.

We should eventually see a levelling off or even a drop when these older houses work their way through, but there may be a lag.

I should add that people buying new houses with mortgages also add to overall mortgage debt along with remortgaging although the numbers remortgaging are small at present.

SkepticOne

P. Breathnach wrote: »

Hang on a moment: are you suggesting that if I have a mortgage of €250,000, sell the property and net €200,000, and end up owing the bank €50,000 it is still counted as "mortgage", even though it is no longer secured by a deed of mortgage?

This will be a reduction of > 50,000 in the overall figure. A 250,000 mortgage is gone and a less than 200,000 mortgage is now there.

These sorts of transactions will increase as job losses take hold depending on the number of houses repossessed and will cause the number to turn negative, I believe.

Dob74

asdasd wrote: »

From the Indo: Link here.




What? Surely we would expect a decline in mortgage lending growth at this stage, not a lower increase? That figure means that debt as a percentage of GDP is still increasing as it was during the boom.

This is scary, we are digging a dipper and dipper hole for ourselves. How in god's name are we going to pay back all this money.

SkepticOne

Dob74 wrote: »

This is scary, we are digging a dipper and dipper hole for ourselves. How in god's name are we going to pay back all this money.

That is the big question. I think it is going to be a combination extra taxes and government borrowing to dig out those in worst situation.