Mortgage Approvals Stabilise at Historic Lows
Published Wednesday October 29th 2007.Today’s announcement by the Bank of England that new mortgage approvals for house purchases totalled 33,000 in September, a 1,000 increase from their August low, may provide a little comfort for all those with a vested interest in the housing market. However, it will take more than a slight bounce from historic lows to confirm a turn in the market, especially as volumes are still down by two thirds from their 2007 levels.
The trend of easing in interbank lending rates continues, the overnight dollar rate dropped by 10 basis points to 1.14pc and the 3-month rate fell 5bp to 3.42pc today, providing an encouraging sign that banks may be tentatively beginning to lend to each other again.
The beginning of what appears to be a three-month counter-trend rally for stockmarkets, which are still in the third cyclical bear of the larger secular bear which began in 2000, may also add a little positive feeling to those who have seen the value of their pension funds decimated in recent months.
In the meantime, borrowers will be hoping that the anticipated 50bp cut in the base rate, expected at the November meeting of the BoE Monetary Policy Meeting next week, will be passed along swiftly and help to cut their interest costs. Earlier today the FOMC, the U.S. equivalent of our MPC, cut the Fed Funds Rate by 50bp to 1.00pc.
No doubt the Government will be hoping that cheaper lending will be forthcoming, thereby providing some shoring-up of the debt-fuelled economy which they had fostered and which is now showing the signs of collapsing under its own weight.
This still leaves the bigger issue of the recession, the secular bull in unemployment and concerns about deflation spreading beyond the confines of asset prices. All these issues need to be addressed if the stabilisation in mortgage numbers seen last month are to be anything other than a pause before a resumption of the downward trend.