BoE votes to keep mortgage rates at 0.5% and other mortgage news

Kennyboy66

IveSeenTheLight wrote: »

Of course equity is on paper only, but the point is that equity is increasing, lessening the chance of 'Negative Equity' or moving those in NE either out of NE or closer towards being out of NE.

You want a source.
The discussion in this thread is about mortgage debt reducing.
If you need an external link, a quick google search found a number of articles relating to "A total of £122billion has been paid into mortgages since summer of 2008." such as: -
http://www.myfinances.co.uk/mortgages/2012/07/04/fewer-brits-borrowing-against-equity-in-their-homes

We can see that the housing market is pretty stagnant, meaning valuations are not decreasing.

If mortgage debt is decreasing whilst valuations remain stagnant, then the difference between the two mean increased equity.

Happy to answer your questions with facts

Don't wish to p1ss on you chips, but they aint exactly facts are they ?

The negative figures for HEW (housing equity withdrawl) are not due to people over-paying their mortages - but is due to less house sale activity and less people re-mortgaging (source Bank of England see link, partic. the pdf file).

http://www.bankofengland.co.uk/statistics/Pages/hew/2011/dec/default.aspx

http://www.bankofengland.co.uk/statistics/Documents/hew/qb110205.pdf

In addition, the total amount secured on property has gone up from £1210 bn in May 2008 (£102,554 average mortgage debt) to £1241 bn in May 2012 (£111,261 average mortgage debt)

source credit action (who take their figures from Bank of England)

http://www.creditaction.org.uk/helpful-resources/debt-statistics/2012/july.html.

Finally - the average house price in Q2 2012 appears to be lower than in Q2 2008 (source Nationwide or land registry).

Now maybe you could explain how equity has risen when average prices have fallen and the average mortgage debt per house with a mortgage has risen.

Facts eh , don't you just love em.

wotsthat

Graham_Devon wrote: »

I fear I might be bursting a bubble, but the BOE implicitly state that the mortgage paydown is through normal monthly payments, and a reduction in new debt.

£122bn has been paid into mortgages since the summer of 2008. It's something like 10% of total mortgage debt cleared in 4 years. This happening during, arguably, the most turbulent financial times the UK has ever seen is nothing short of amazing.

The BoE report referred to simply bursts the bubble that mortgage holders are indebted and frightened. It shows that they are getting on with life, making their monthly repayments, and improving their financial positions.

Graham's favourite report is here if anyone is interested.

http://www.bankofengland.co.uk/statistics/Documents/hew/qb110205.pdf

I'll keep stating my opinion too. When mortgage rates become somewhat higher than savings rates we'll see saving accounts being emptied and the cash poured into mortgage accounts. For the time being though it makes no sense to overpay for a significant proportion of mortgage holders as better returns can be achieved on savings.

Kennyboy66

wotsthat wrote: »

£122bn has been paid into mortgages since the summer of 2008. It's something like 10% of total mortgage debt cleared in 4 years. This happening during, arguably, the most turbulent financial times the UK has ever seen is nothing short of amazing.

The BoE report referred to simply bursts the bubble that mortgage holders are indebted and frightened. It shows that they are getting on with life, making their monthly repayments, and improving their financial positions.

Graham's favourite report is here if anyone is interested.

http://www.bankofengland.co.uk/statistics/Documents/hew/qb110205.pdf

I'll keep stating my opinion too. When mortgage rates become somewhat higher than savings rates we'll see saving accounts being emptied and the cash poured into mortgage accounts. For the time being though it makes no sense to overpay for a significant proportion of mortgage holders as better returns can be achieved on savings.

You are taking the HEW figure and assuming this means that the whole £122 billion are over payments.

This is fundamentally wrong. Try reading the report.

"This suggests that, as a whole, the household sector has not been actively paying
down debt more quickly than in the past (although some
individuals may have been). This is consistent with intelligence
from the major UK lenders that there had not been widespread
overpayments of mortgages in 2010."

RenovationMan

This is an interesting article based ont he BoE figures and summary. It seems to have really contradictory messages, which I am assuming comes from the BoE summary:

http://www.google.com/hostednews/ukpress/article/ALeqM5jy51Z0a0HunSDUnV8zTHc7GeN2YA?docId=N0274411341396521371A

Mortgage debt down by £8.8 billion
(UKPA)–2 days ago
Britons have reduced their mortgage debt by £8.8 billion in the first quarter of this year as the housing market remained subdued, Bank of England figures show.
The figures indicate that households are putting more money into the housing market, through deposits or mortgage repayments for example, than they are taking out, with a cumulative £122 billion injected since the summer of 2008.
However, the Bank said there was "little sign" that households are trying to pay down debt more quickly than in the past, and a lack of activity in the housing market and a reduction in remortgaging are underlying the figures.
Several surveys have forecast house sales to remain sluggish this year, with continued uncertainty over the economy and the eurozone and lenders predicted to tighten their borrowing criteria further and raise their rates.
There has been a general trend towards injections of housing equity since the start of the financial crisis, with a reduction of nearly £8.6 billion in mortgage debt in the final quarter of last year.
The latest figure shows that households spent the equivalent of 3.3% of their post-tax income on reducing their mortgages. However, the figure remains below a record net injection of £10.1 billion seen during the spring last year.
The weak and patchy housing market has left many people with insufficient equity in their homes to withdraw money, while home owners could also find it harder to increase the size of their mortgage due to the tighter criteria being applied by lenders.
Analysts said the trend towards an injection of cash rather than a withdrawal seen for 16 quarters in a row could have a restricting effect on consumer spending, affecting the wider economy.
Howard Archer, chief UK and European economist at IHS Global Insight, said that despite the Bank playing down people's desire to pay down their debt more quickly as a factor, poor returns on savings have "undeniably" made it more attractive for people to use any spare funds to reduce their mortgages.
Vicky Redwood, chief UK economist at Capital Economics, said: "The low level of transactions has also reduced the opportunity for households actively to withdraw equity when they buy a house or remortgage. And for many households, this will therefore have reduced the funds they have available to spend."

If Howard Archer is correct and the BoE is playing down people's desire to reduce their mortgage debt, just to try and keep people spending money and supporting the economy, then it does make their analysis a little suspect and does show that even the BoE slants data to support their own VI.

wotsthat

Kennyboy66 wrote: »

You are taking the HEW figure and assuming this means that the whole £122 billion are over payments.

This is fundamentally wrong. Try reading the report.

"This suggests that, as a whole, the household sector has not been actively paying
down debt more quickly than in the past (although some
individuals may have been). This is consistent with intelligence
from the major UK lenders that there had not been widespread
overpayments of mortgages in 2010."

Try reading what I wrote.

Where do I say, or assume, ANY of the HEW figure is an overpayment?

Good luck.

IveSeenTheLight

Kennyboy66 wrote: »

Don't wish to p1ss on you chips, but they aint exactly facts are they ?

Now maybe you could explain how equity has risen when average prices have fallen and the average mortgage debt per house with a mortgage has risen.

Facts eh , don't you just love em.

Facts, of course I love em.

Let's keep this simple.
http://www.independent.co.uk/money/mortgages/mortgage-debt-down-by-88bn-7908101.html

Britons reduced their mortgage debt by £8.8 billion in the first quarter of this year as the housing market remained subdued, Bank of England figures showed today.

So mortgage debt has reduced in the first quarter of this year.
Preices are pretty stagnant, therefore the equity must be expanding.

Now I did post on another thread that this means that those in NE due to previous valuation decreases will find that they are a little less in NE or indeed some may even be out of NE, depending on their personal situation.

The facts remain though that in general, the nett effect on equity is that it is increasing.

RenovationMan

Whats remarkable is the 'sleight of hand' the BoE is using in their analysis to try and prevent the UK from 'turning Japanese' and bolstering their own finances at the expense of the economy.

They are trying to suggest that people are not paying down debt any faster than in the past, while also reporting that equity withdrawal is virtually non existent. It's quite a piece of magic when you analyse it.

What is really happening is comparable to someone having a savings account. Pre 2007 they paid a regular sum into it of, say, £300 per month and used it to buy large ticket items once the amount increased to a decent amount.

Post 2007, the person is STILL paying £300 per month into the savings account (and therefore is showing '"little sign" that he is increasing savings more quickly than in the past') but he is now not removing any of that money from the savings account to buy large items.

The net effect is that his personal wealth is increasing, just as the equity of people who continue to repay their mortgage (and not MEW) are seeing their net equity increasing. I love the bank's sleight of hand on this and I love the fact that some people are unable to see through it. Most amusing.

IveSeenTheLight

Incidently
A shock slump in mortgage debt

http://money.uk.msn.com/mortgages-and-homes/articles.aspx?cp-documentid=250453554

In May, mortgage debt fell for the first time since 1997. You could join this repayment revolution!
Something very, very unusual happened last month. In May, UK mortgage debt went down from one month to the next.
What this means is that Britain's 11.3 million mortgage borrowers paid back more than banks lent to new borrowers. For the record, this is the first time that repayments have exceeded the amount being lent since month-by-month records began in 1997.
According to the British Bankers' Association (BBA), mortgage approvals in May were the lowest for more than a year. They fell by over 3% to 30,238, while net mortgage lending dipped by £73 million from April. In other words, existing borrowers repaid £73 million more than borrowers took on in new debt in May.

IveSeenTheLight

RenovationMan wrote: »

The net effect is that his personal wealth is increasing, just as the equity of people who continue to repay their mortgage (and not MEW) are seeing their net equity increasing. I love the bank's sleight of hand on this and I love the fact that some people are unable to see through it. Most amusing.

This is the point I was making (maybe not well).
It's clear that equity appears to be increasing at the moment, even if it is simply people paying down their mortgages at the previously agreed rate.

RenovationMan

IveSeenTheLight wrote: »

This is the point I was making (maybe not well).
It's clear that equity appears to be increasing at the moment, even if it is simply people paying down their mortgages at the previously agreed rate.

I think people need to remember that repayment mortgages actually repay mortgages (the clue is in the title). You therefore don't have to make OVERPAYMENTS in order to reduce mortgage debt, you just keep making your monthly repayments and the mortgage takes care of itself.

What I think is happening is that those people who previously used MEWing to fund their lifestyle and for debt repayment are now unable to do so and instead have curtailed their lifestyles and live more within their means and are paying down their debts the hard way instead of using house equity.

Basically, people are learning to live within their means and their net wealth is increasing as a consequence.