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[sir rational] 11/3/2011 12:36

Oriel view
 If there is a return of the MIG (or MIG +MPP) it will be a game changer for the UK housing market. We have reasons to believe that there is a realistic chance of such a MIG+MPP product being offered and that there are compelling reasons why the average homebuyer believes the worst is over.

[sir rational] 11/3/2011 12:27

Game changer! I like the sound of that

[sir rational] 11/3/2011 12:23

BEMortgage dataNHandNHno advances?BEQuite the reverseBEHouse sales down 29% in January from DecemberNHdown 29%NHwowNHHPC here we comeBEThough, really, we're dealing with such small numbers that there's not much volume needed to create a 29% dropBEThe Council of Mortgage Lenders, which has collated the data, said an "unusual combination of factors" have led to the extreme drop, which is "greater than seasonal factors alone would explain".BE"With spending cuts beginning to bite, and rising inflation and tax measures putting pressure on household budgets, potential house-buyers are likely to have been discouraged. This, coupled with December's extreme winter weather, and uncertainty over future interest rate rises, has led to a lack of movement in the mortgage market,"BEThe value of house purchases fell by 26% from December to January, and by 13% compared to January 2010. However the CML said that the rush to purchase at the end of 2009 because of the stamp duty concession ending led to an artificially low level of lending in early 2010. This means the 13% year on year fall is much more substantial than it appears.NHthanksNHI have some reaction to thisBEThat's all from the Guardian.NHsomewhereNHform the ArcherBE where's Archer?NHThe Council of Mortgage data (CML) mortgage advances data for January are very weak and reinforce our suspicion that house prices will remain under downward pressure in the near term at least. Specifically, the CML reported that mortgage advances for house purchases were limited to 28,500, which was down 29% from December and down 12% from January 2010.

The very weak CML mortgage advances data for January indicates that the housing market started 2011 on the back foot and supports our belief that house prices are headed down further over the coming months. Specifically, we expect house prices to fall by around 5% in 2011 and ultimately decline by around 10% from their peak 2010 levels.

We believe that the fundamentals remain largely unfavourable for the housing market even though signs that fewer houses are now coming on to the market could provide significant support for house prices if sustained. Even if fewer houses do come on to the market over the coming months though, this is likely to be countered by ongoing low housing market activity reflecting the pressure on buyersNHThe housing market is be pressurized over the coming months by high and likely to rise unemployment, negative real income growth, the increasing fiscal squeeze, very low consumer confidence, and ongoing difficulties in getting a mortgage (particularly for first time buyers).

Further bad news for the housing market is the now strong possibility that the Bank of England will start to raise interest rates within the next few months to counter above target and rising inflation. Any early interest rate hike would be bad news for the housing market and likely to weigh down on prices - not just the rate rise itself but also the impact on potential house buyers' psychology resulting from the fact that they would be facing rising interest rates with the prospect of more to come.NHIt is clear that critical to the development of house prices over the coming months will be the amount of houses coming on to the market, mortgage availability, how well the economy and jobs hold up as the fiscal squeeze increasingly kicks in, and what happens with interest rates.BEComprehensive as always.NHany reaction from the housebuildersBarratt Developments Plc (BDEV:LSE): Last: 100.40, down 3.4 (-3.28%), High: 103.60, Low: 100.10, Volume: 2.59mBovis Homes Group PLC (BVS:LSE): Last: 427.20, down 13.6 (-3.09%), High: 441.80, Low: 425.80, Volume: 107.11kRedrow PLC (RDW:LSE): Last: 122.10, down 3.5 (-2.79%), High: 124.50, Low: 122.00, Volume: 115.59kNHa bit of reaction thenBEThough in the context of the market, not huge.NHbut help could be at handNHpicked up an odd note from Oriel todayNHabout some sort of insuranceNHbacked by the govtNHfor 95% mortgagesBEGive us a look then.NHThe key constraint in the market is mortgage availability, or rather deposit requirements. Yesterday, we spoke to a national housebuilder who suggested that the lenders, the Government and the CML all agree that the solution to the mortgage drought (or deposit gap) is the return of the Mortgage Indemnity Guarantee (MIG) and that we could see a market wide MIG solution, including a Mortgage Payment Protection Policy (MPP) linked to a 95% LTV product towards the end of CY2011. They also commented that on the ground, the average house buyer believes the worst is over.NHOriel view
 If there is a return of the MIG (or MIG +MPP) it will be a game changer for the UK housing market. We have reasons to believe that there is a realistic chance of such a MIG+MPP product being offered and that there are compelling reasons why the average homebuyer believes the worst is over.
NHnot sure about thatNHSupport for the MIG+MPP.
 One national housebuilder already offers a MIG on 95% LTV products in certain regions.
 Another national housebuilder currently offers a 90% LTV product with MPP, which we understand will soon be joined by a 95% LTV product also with MPP.
 We spoke to another national housebuilder, who believes that a market wide mortgage solution is required to kick start the housing market and that it is 'right sized' for the current market. It does not currently offer a high LTV product, but has infrastructure in place to support a 40% increase in volumes. It is our view that this builder happy to have 'excess capacity' because it believes a market solution to the deposit gap is a realistic prospect.
NHSupport for the view that 'the worst is over'.
 House prices have been stable for the past 12 months, whilst national house price indices suggest volatility they are impacted by mix changes, at a local level where a homebuyers search is for a certain house type, prices of a particular house type in a particular are stable.
 Wage increases have either started to come through or are on the horizon.
 Unemployment is less of a concern, in the main, the private sector stopped laying off staff 9-12 months ago and those public sector workers impacted by the CSR have been informed.
NHthere you goNHnot heard about Migs myselfNHother than the ones in Libya

[sir rational] 11/3/2011 12:14

They are still low base months so relatively small changes can appear to have an inappropriately high % change. Better to wait for Easter.

[smurfy2001] 11/3/2011 12:07

The Council of Mortgage Lenders, which has collated the data, said an "unusual combination of factors" have led to the extreme drop, which is "greater than seasonal factors alone would explain".

"With spending cuts beginning to bite, and rising inflation and tax measures putting pressure on household budgets, potential house-buyers are likely to have been discouraged. This, coupled with December's extreme winter weather, and uncertainty over future interest rate rises, has led to a lack of movement in the mortgage market,"

The value of house purchases fell by 26% from December to January, and by 13% compared to January 2010. However the CML said that the rush to purchase at the end of 2009 because of the stamp duty concession ending led to an artificially low level of lending in early 2010. This means the 13% year on year fall is much more substantial than it appears.

[smurfy2001] 11/3/2011 11:50

Be careful all, l won't trade today as we broke below 12000 DOW despite QE2 POMO/TOTO.

[sir rational] 11/3/2011 11:47

Going to be OK today, climb on board

[smurfy2001] 11/3/2011 11:41

Japan earthquake and Saudi Arabia riots are hot on the news.

[imastu pidgitaswell] 11/3/2011 11:21

PSN and BDEV not happy...

All too soon to say, it's still intra-day. Could well close above 40p for the week - a much more obvious support - having had the FTSE hammered for a couple of days, a bouncette could be due later.

0.75p to 40p - we say a 1p movement in 30 seconds this morning, and back up. All too soon...

[sir rational] 11/3/2011 11:03

Fingers said support @ 39.25p and we're right on that just now...strong bounce or plunge lower...?

[sir rational] 11/3/2011 10:48

I can see where PG are coming from, don't agree with them (yet)

[sir rational] 11/3/2011 10:41

Cup & handle driven by world events/ mkts then breakout on TM sale - I like it

[gbh2] 11/3/2011 10:21

oppss wrong thread :)

[slytherin] 11/3/2011 10:13

My nickname isn't Wedgewood for nothing :o)

[slytherin] 11/3/2011 10:12

Tempting to trade a handle, but I'm not going to risk it in case of a disposal announcement, which could give a breakaway gap

[spennysimmo] 11/3/2011 10:12

Slytherin, you know your chinaware.

[kfp] 11/3/2011 10:10

Don't forget a few people on on nearly 100% profit here, can't blame them for taking money off the table and maybe buying a footsie stock paying a dividend.

[slytherin] 11/3/2011 10:09

Could be the handle starting. In theory we could drop by a 1/3rd of the right side of the cup (i.e. down 6p from the high of 42p to 36p)...before climbing to 60p (42p + cup height 18p).

[sir rational] 11/3/2011 10:00

Just the daily with the shaded bit showing the spread, ie the blues are actual trades. That spike down happened when there was a massive spread.

[jibba_jabba] 11/3/2011 09:59

All the roads are heading NORTH..

[spennysimmo] 11/3/2011 09:57

SR, what exactly is that chart? lol.

[sir rational] 11/3/2011 09:53

Like it Jibba but I reckon the outer tramline might be a tad wider!