#Moduloft, The Affordable Housing Manufacturers. Defining the Terms of and Boundary Conditions of our Domain.

The outstanding value of all residential mortgage loans was £1,527.3 billion at the end of 2020 Q3

two thirds of households own the house they live in; half of these are still paying off their mortgage

28,536,000 Dwellings

29,180,071,800 sq ft 29 Billion Sqft .

The effectiveness of any Model is determined by a number of factors, Integrity of the data, and what scientist/modelers call defining the extent of the models domain, what we might call Parameters or Boundary conditions. To understand “The Housing Market” and make contributions to it a good place to start is How Big is it and what are its constituent parts.
What is it.

What is the housing market?
When people buy or sell houses, either to live in or as an investment, we refer to this as the housing market. A house is the most valuable thing many people will ever own.

In Britain, two thirds of households own the house they live in; half of these are still paying off their mortgage. The remaining third of households are renters, split fairly equally between private and social renting.( Source. Bank of England. )

How Big is It Physically.

(Source: Building Research Establishment.)

From the above table of 2017 Data

In the United Kingdom there were 28,536,000 Dwellings with an average Dwelling size of 95SQM or 2,710,920,000 sqm or Errors pp 56/57 28,536,000 dewellings x 95sqm= 2,710,920,000 Sqm 29,180,071,800 sq ft 29 Billion Sqft

UK Housing Stock Total

29,180,071,800 sq ft 29 Billion Sqft

Plot Size and Dwelling Size

How do we Value it?

Median House Price to Income Ratios.

From Fixing our Broken Housing Market 2017, Sajid David.( Ex Deutsche Bank)

The FCA and the Prudential Regulatory Authority (PRA) both have responsibility for the regulation of mortgage lenders and administrators. We jointly publish the mortgage lending statistics every quarter.

Since the beginning of 2007, around 340 regulated mortgage lenders and administrators have been required to submit a Mortgage Lending and Administration Return (MLAR) each quarter, providing data on their mortgage lending activities.

Key findings

The outstanding value of all residential mortgage loans was £1,527.3 billion at the end of 2020, 2.9% higher than a year earlier (Table A).
The value of gross mortgage advances in 2020 Q3 was £62.5 billion, 14.7% lower than in 2019 Q3 (Table A and Chart 1).
The value of new mortgage commitments (lending agreed to be advanced in the coming months) was 6.8% higher than a year earlier, at £78.9 billion and the highest level since 2007 Q3 (Table A and Chart 1).
The share of gross advances with interest rates less than 2% above Bank Rate was 74.2% in 2020 Q3, 10.0 percentage points (pp) lower than a year ago (Chart 2). See the Bank’s data on Effective Interest Rates.
The share of mortgages advanced in 2020 Q3 with loan to value (LTV) ratios exceeding 90% was 3.5%, 2.4pp lower than a year earlier (Chart 3).
The share of gross advances for remortgages for owner occupation was 25%, a decrease of 3pp since 2019 Q3. The share for house purchase for owner occupation was 55.8%, up 2.6pp from 2019 Q3. (Chart 5).
The value of outstanding balances with some arrears fell by 1.2% over the quarter to £13.8 billion, and now accounts for 0.90% of outstanding mortgage balances (Chart 6).





How are these Lending Decisions Made, and where does the Money Come from?


A second innovation is the theory-justified
use of an estimate of the proportion of mortgages in negative equity, based on an average debt
to equity ratio, as one of the key drivers of possessions and arrears.


Possessions and arrears are driven by three economic fundamentals: the debt service ratio; the
proxy for the proportion of mortgages in negative equity, calibrated from an average debt to
equity ratio; and the unemployment rate. Modelling the three equations as a system with
common lending quality and policy shifts helps greatly in the identifying the unobservables.
By sharp contrast with earlier UK literature, there is no significant effect on the rate of
possessions from either measure of arrears. This important finding is discussed further below.

The long-run effects24 on the possessions rate are shown in Figure 7 for the debt-service ratio,
estimated proportion in negative equity and the unemployment rate. Figure 8 shows the longrun impact of loan quality and forbearance policy, discussed further below. The figures
suggest that in the first possessions crisis in 1989-93, the initial rise in possessions was driven
mainly by the rise in the debt-service ratio, combined with lower loan quality, but later the
rising incidence of negative equity emerged as an important driver. The persistence of
negative equity prevented a faster decline in possessions, despite lower interest rates and the
forbearance policy introduced at the end of 1991. In the second possessions crisis, the rise in
possessions from its low level in 2004 again was caused by a growing debt-service ratio, and
later the increasing incidence of negative equity, which rose sharply in 2008-9.

To illustrate the magnitudes implied by this research, a 10 percent increase in the debt-service
ratio, for example due to the mortgage interest rate rising from 4 percent to 4.4 percent, is
estimated eventually to raise the possessions rate by around 19 percent, and the 6 month
arrears rate, corrected for measurement bias, by 15 percent. This calculation holds the
proportion of mortgages in negative equity and the unemployment rate fixed.
At 2009Q3 house price and debt levels, a fall in house prices of 1.4 percent would raise the
proportion of mortgages with negative equity from an estimated 8.5 percent to 9.35 percent, a
10 percent proportionate increase. An increase of this magnitude in the rate of negative equity
is estimated eventually to increase the possessions rate by 7 percent and the 6 month arrears
rate by 3.5 percent. A ten percent increase in the unemployment rate from 8 percent to 8.8
percent is estimated to increase the possessions rate by 2 percent32 and the 6 month arrears
rate by 10 percent.

sustainability of these relatively benign conditions is questionable, however, given the

31 In late 2009 the spread between mortgage rates on new loans and base rate was close to 350 basis
points, with base rates at 0.5%. It seems likely that the spread would narrow with base rates at 1.5 or 2
%. Also with slightly higher base rates and hence higher deposit rates, retail saving flows into banks
are likely to improve, perhaps easing credit constraints on lending.
32 This estimate is less accurate than the others and the figure could well be as high as 4 percent.
funding gap between retail deposits in UK banks and their loan book33, the time-table of
withdrawal of the Special Liquidity Scheme and the Credit Guarantee Scheme, and concerns
over the UK‟s sovereign debt.

?, see Exploration of claimed link between Deposits and Bank Lending, in Werner Quantity Theory of Credit.???? ( otherwise this seems a very good paper!!!

Two UK government objectives are to improve housing affordability and to restore financial
stability. Housing has become unaffordable for many younger people, perpetuating the
inequality from the redistribution of housing wealth of the late 1990s to 2007, from potential
first-time buyers to older and wealthier households. However, substantial falls in house
prices, triggered by the removal of income support, higher interest rates and potentially by
supply and demand side reforms34
, could increase negative equity and exacerbate the problem
of bad banking loans. It would, however, be a mistake to take the risk of substantial falls in
house prices as an excuse for not expanding residential land supply. For if reforms of the
planning system and of incentives for local governments to expand the supply of residential
building land were to increase the rate of future building, DCLG‟s housing affordability
model and research done for the Barker review suggests that the effects on house prices
would be felt only gradually. A further advantage in the short-run would be employment
gains in the building industry at a time when the public sector will be shedding jobs. In the
long-run, a more sustainable level of house prices relative to the financial capabilities of
households should reduce the risk of new crises.


BoE data showed mortgages with LTVs higher than 90 per cent accounted for nearly 11 per cent of the market in the second quarter of 2007, but that had dropped to 2 per cent in the same quarter of 2009.

Between 2009 and 2014, the share of high LTV mortgages spiked above 2 per cent in only three quarters but has gradually increased over the past five years.

December 2020
The share of mortgages advanced in 2020 Q3 with loan to value (LTV) ratios exceeding 90% was 3.5%, 2.4pp lower than a year earlier (Chart 3).

Back to December 2019, ( A year is a long time in Confidence Land.)

Dan White, director at Champion Hall & White, thought the mortgage price war was partly responsible for the increase in high LTV products.

He said: “Customers will opt for 90 and 95 per cent mortgages more partly because the rates have come down so much.

“I think lenders are more willing to lend at the level, too, although it’s more strict than it was in 2007. A consumer’s affordability and credit score have to be strong to get a 95 per cent mortgage.”

Mr White added that lending at 95 per cent LTV was acceptable as long as lenders looked after their borrowers and were willing to offer their customers new deals, rather than expensive retention rates.

But Sarah Drakard, independent financial adviser at Cruze Financial Solutions, said the high share of high LTV mortgages was “worrying” because the property market was “just not strong enough” to deal with the risks.

She added: “People forget about the financial crash. A few years ago, my first-time buyer clients didn’t want to buy a property with small deposits as they thought it wasn’t the ‘safe’ thing to do.

“But now people are perhaps struggling to save, or parents are less willing to give money in unpredictable political times, so less people are able to save for big deposits.”

There’s more to house prices than interest rates
BankUnderground Financial Stability, International Economics 03 June 2020 7 Minutes
Lisa Panigrahi and Danny Walker

The average house in the UK is worth ten times what it was in 1980. Consumer prices are only three times higher. So house prices have more than trebled in real terms in just over a generation. In the 100 years leading up to 1980 they only doubled. Recent commentary on this blog and elsewhere argues that this unprecedented rise in house prices can be explained by one factor: lower interest rates. But this simple explanation might be too simple. In this blog post – which analyses the data available before Covid-19 hit the UK – we show that the interest rates story doesn’t seem to fit all of the facts. Other factors such as credit conditions or supply constraints could be important too.


Authors: Ryland Thomas (Bank of England) and Louisa Nolan (Office for National Statistics).
The financial crisis has re-emphasised the importance of tracking the financial transactions of different agents in the economy and how those flows affect their balance sheet positions and the build up of risk in the financial sector. The current financial accounts published by the Office for National Statistics (ONS) only start in 1987 although historical estimates based on earlier systems of national accounts are available back to the 1950s. This article outlines some preliminary work undertaken by the ONS and the Bank of England, with the encouragement and help of external academic consultants1, to try and reconstruct historical financial accounts and balance sheets by institutional sector for the UK. It sets out the challenges of reconciling accounts from a range of sources, which were produced with different methodologies and classifications, giving some key examples. In addition, several historical datasets for financial accounts and balance sheets, back to 1920, accompany this publication.
2.Introduction – the value of understanding the past
The recent financial crisis has highlighted the importance of monitoring financial transactions between different institutional sectors in the economy and how financial assets and liabilities are distributed across different sectors on their balance sheets. Recently the ONS and the Bank of England published a review of the existing set of sector financial accounts, including some initial estimates of “from whom and to whom” transactions, using data already available in the compilation of the financial accounts. But, as recently highlighted by Bjork and Offer (2013), the analysis of financial transactions in the economy often needs to be put in historical context especially when financial crises are rare events. In particular, econometric-based policy work benefits from the availability of long time series that span different policy regimes and cover periods of structural change in the financial sector. The current set of published financial accounts and balance sheets began in 1987. Older estimates of the financial accounts are available back to the 1950s, following the recommendations of the Radcliffe Report (1959) and growing interest in modelling the financial interdependence between sectors Roe (1973). Measures of national and personal sector wealth are available for even earlier periods.

The current post-1987 dataset roughly covers a 30-year period when the UK financial sector was largely liberalised and free of direct financial controls following various reforms in the 1970s and 1980s. But the recent introduction of macroprudential policy in the UK and the need to understand how its instruments work has rekindled interest in how the more controlled financial environment of the 1950s and 1960s worked. During this period the authorities operated various policies that, at least superficially, bear some resemblance to the tools at the disposal of today’s macroprudential policy makers. The Bank of England’s One Bank Research Agenda, suggests there are benefits from understanding the financial system of the 1950s and 1960s as it may shed light on how macroprudential tools might operate. Historical data on financial accounts and balance sheets is a key part of developing that understanding.

Section 2 sets out the historical development of the financial accounts and balance sheets in the UK. In Section 3, the challenges of reconciling a range of historical data sources, produced using different methodologies and classifications are discussed. Section 4 looks at some examples in more detail, and conclusions are presented in the final section.


And here comes the No Shit Sherlock Moment!

There could be a role for changes in credit conditions. The framework assumes that people are not credit constrained, meaning they can exploit arbitrage opportunities by buying up rental properties. If there are frictions in practice, this could mean that credit conditions matter for house prices. Mortgage debt expanded rapidly as house prices rose in the UK before the crisis, so this could be an important channel for the UK.

Institutional real estate investors, leverage, andmacroprudential regulation
Manuel A. Muñoz 14 November 2020

Institutional real estate investment has more than quadrupled in the euro area since 2013, financed largelythrough non-bank lending, which is not subject to regulatory loan-to-value limits. This column uses a two-sectormodel of institutional real estate investors calibrated to quarterly data from the euro area economy to showthat optimised (countercyclical) loan-to-value rules limiting the borrowing capacity of such investors are moreeffective in smoothing property price, credit, and business cycles than the well investigated dynamic loan-to-value rules that affect (indebted) households’ borrowing limit. The findings call for a strengthening of themacroprudential regulatory framework for non-banks.




Utilising the Quantity Theory of Credit to Understand the Causes of the 2007 Financial Crisis
Home » Educational resources » Sub-disciplines » Money, Banking & Finance
© Copyright Maurice Starkey 2018 and available for reproduction under a Creative Commons CC-BY-SA license. Download this as a Microsoft Word document.

1. Financial Deregulation
2. Credit money creation by banks and building societies
3. The Quantity Theory of Credit
4. Central Bank Policies to Manage the 2007 Financial Crisis
4.1 Should the Bank of England reduce interest rates in response to this type of financial crisis?
4.2 What type of quantitative easing is appropriate?

Banking crises tend to follow a period of rapid increases in asset prices (Reinhart & Rogoff, 2009). A substantial allocation of credit money creation for purchasing property and financial assets within secondary markets caused significant asset price inflation, which provided the context for the 2007 financial crisis (Werner R. A., 2013, p. 366). At some point the perception that assets may be over-valued influences investors’ perceptions of likely future price movements, and asset prices will fall when credit creation is no longer forthcoming for further asset purchases. This context produces a ‘Minsky Moment’ (Minsky, 1992). Falling asset prices cause speculators to lose money, and their loans will become non-performing because investors are unable to fulfil their contracted repayments. Banks have a relatively small capital cushion of around 10% of their asset base. Therefore, when the diminution in the value of a bank’s assets exceeds 10% it will cause the bank to become insolvent. Adair Turner (2017, p. 6) states:

“The vast majority of bank lending in advanced economies does not support new business investment but instead funds either increased consumption, or the purchase of already existing assets, in particular real estate. Real estate is relatively fixed in supply, and consequently the transfer of funds to this sector leads to asset price increases that induce yet more credit demand and more credit supply, which is at the core of financial instability in modern economies”.

The outstanding value of all residential mortgage loans was £1,527.3 billion at the end of 2020 Q3

two thirds of households own the house they live in; half of these are still paying off their mortgage

28,536,000 Dwellings

29,180,071,800 sq ft 29 Billion Sqft .

Author: rogerglewis

https://about.me/rogerlewis Looking for a Job either in Sweden or UK. Freelance, startups, will turń my hand to anything.

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