Buy to Let is the British subprime

Generali

There is going to be a lot of pain at an individual level as losses on BTL are realised and have to be paid for. Is this the 'UK subprime'? That's a very point.

My feeling is that for the most part, BTL losses are going to be able to be absorbed by owners. They'll end up working a lot longer than they planned or end up with a much reduced retirement income but I suspect that these are not going to cause big macro problems like in the US.

My landlord for example is subsidising my rent to the tune of £k per month. Is that causing him pain? Probably. Is it going to shut down the market for interbank lending? Probably not.

kennyboy66_2

Now that many BTL'ers are donald ducked, it would be a good time for the government to remove some of the tax advantages that Landlords enjoy.

I fully understand that for some it is a proper business and that they needs to be a mix of rental property on the market.

However BTL'ers are competing with 1st time buyers in many areas. Why should they enjoy generous tax breaks to enable them to outbid decent people who just want to own their own home?

Alan_M_2

Plus what we call subprime is nothing compared to the antics the Americans were up to.

They were (no exaggeration) giving mortgages to people the week they were released from prison with no employment prospects, people on welfare that had no hope of making the payments required etc etc...

I know the British banks have been somewhat carried away with the flow, but they did actually still retain some (albeit lax) requirements. The Amercians on the whole seem to throw the rule book out of the window, hence the reported arrests taking place over there.

UK sub prime? No

Property slump and the downward pitch on the inevitable cycle, causing genuine hardship to a small percentage, and making the majority tighten the purse strings - Yes, absolutely.

Is it the end of the financial world as we know it? - No....what goes up must come down, the economy will march on, the government will be changed for the next bunch, the fat cats will get fatter, the poor will get poorer the middle class will continue to clammer for ever larger houses, shiny new cars, must have designer clothes and handbags that cost a months wages.

In 2028 when my partners 10 year old daughter is 30 years old and an entire generation of kids are now at house buying age and earning decent incomes we'll be staring rampant HPI in the face listening to the bulls telling us property is a great investment, it's different this time etc etc......I'll allow it all to wash over me.

sarkin

Alan up until last summer you could get a mortgage in the UK with bad credit and lenders would except disibilty payments, working tax credits, family income benefits.

There where some brokerages out there doing 400 + sub prime right to buy mortgages a month, I know I worked for 1.

These are the people with the least financial acumen and will struggle the most.

We are now at the point of trying to guess how far property prices are going to slide, some parts of the country will get hit 50% - 60% (auction prices are already going at 50% down).

There are so many parts to this that you cant put a finger on as to which part will be the most severe.

BTL is one, followed by I/O mortgages, self cert, fast track, and the thousands of people on official sub prime mortgages from kensington , GMAC and the rest.

brit1234

sarkin wrote: »

BTL is one, followed by I/O mortgages, self cert, fast track, and the thousands of people on official sub prime mortgages from kensington , GMAC and the rest.

It was obvious to see that buy to let was highly unstable and yet people were piling on to the bandwagon. I have a degree in disaster management so maybe I spend more time risk assessing thing things than others but I have a little experiment below for those who say buy to let is not risky

Have a game of monopoly and proceed in going round the board buying as much property as you can. When you run out of money mortgage your properties to get more cash and use that money to buy more properties. Repeat doing this and you replicate the dangers of buy to let. Either you win big or loose very badly as you have no emergency cash supply when you hit a downturn.

Investors need to realise they need a good buffer zone and cash reserves to weather any storm. They need resilience which many have sacrificed to buy further properties.

SouthCoast

I like the Monopoly analogy.

Having played games that lasted for hours and hours, have found this:

http://tonedef.selfip.org/monosim/

Just found this in my link:

TONY-OWNED PROPERTIES:

---

TONY WENT BANKRUPT - TURN 58 - bankrupt to JEFF (only had $500, needed $550)

65: TONY proposes playing STRIP MONOPOLY - take off clothing when you go to jail.

neverdespairgirl

The thing about playing monopoly is that if you go badly tits up, you can pack the board away and go and make a cuppa (-:

sarkin

I think a lot of people who are in it for the long term now wish they could pack it all in.

Conrad

sarkin wrote: »

There where some brokerages out there doing 400 + sub prime right to buy mortgages a month, I know I worked for 1.

Out of interest how did these firms generate so much interest?
I've always been anti advertising, and whilst I realise this market is poor come what may, I'm just wondering whether to really go for it on the marketing side, say for 3 months just to see what happens.

For example if I spent £2000 - £3000 per month on local press advertising I wonder whether it would be worth it.

As I say I've always erred against spending but keep thinking whether this really has been the right approach.

sarkin

Advertising on satelite channels is how you generate that many deals. As for not advertising, do you know of a company besides yourself that does not advertise, sounds kind of strange to me.

(thread drift)