Peston sees negative impact on BTL from B&B fiasco

WTF?_2

http://www.bbc.co.uk/blogs/thereporters/robertpeston/2008/09/bb_end_of_an_era.html

The reverberations from the nationalisation of Bradford & Bingley (see my note of last night for more on this) will be profound.
First, it takes out of the market the leading provider of buy-to-let and self-cert mortgages.
Once the £41bn of B&B's mortgages is publicly owned, it will be run down over the coming years.
And it's very unlikely that the Government will feel it wants to use taxpayers money to provide new buy-to-let and self-cert mortgages.
In other words, two big chunks of the mortgage market will be all-but closed - since few other banks are remotely interested in providing this kind of mortgage, which are perceived as higher risk.
That will add to the downward pressure on house prices - and may be a source of anxiety to buy-to-let investors who may have difficulty refinancing their mortgages as and when they need to do so.

I can't believe that the government can't see the amazing opportunity they have to get in on all the BTLing that we are assured by some here will be going on now that prices have dropped a bit! I'm beginning to lose faith in the 'savviness' of Brown and Darling.


Meanwhile for those of us in the real world, yet more confirmation that we are just entering the really turbulent waters. This 'sucker' has a lot further to go down, I wouldn't want to be holding onto BTL properties bought since 2005 that's for sure.

amcluesent

Just thinking, isn't Tesco ideally placed to clean up from the banking crisis. After all they turn stock in 14 days, but pay on 30 and generate huge positive cash flows. And the one thing we need now is liquidity as inter-bank lending has collapsed...I wonder if their FD has been on this case?

Gorgeous_George

!!!!!!? wrote: »

blah blah...

... I wouldn't want to be holding onto BTL properties bought since 2005 that's for sure.

...or any other property bought since 2005 for that matter? If BTLers bought for the long term (that's longer than !!!!!!'s attention span), they need to ignore house price deflation.

IMHO, the main threat to BTL is that house prices become so low that people choose to buy rather than rent. I think there will be plenty of tenants for some time to come. Recession decreases the number of people who can afford to buy a house.

The biggest mugs are those currently entering the BTL market because they cannot sell at a high enough price. That is just one of the many wrong reasons to be a landlord.

GG

HelpWhereIcan

Again Robert Peston appears to report part of the facts.

There have been other lenders much more active in BTL and Self Cert this year. Mortgage Express effectively started to price themselves out of the market in the early months of the year.

I have not seen Mortgage Express feature in my Buy to Let sourcing results for at least a couple of months. I researched and presented 7 buy to let remortgages last week - not a single reccomendation for Mortgage Express and I think the last MX deal I did was January time.

The choice of lender is no longer as wide as it once was, criteria is tighter and only those with the cash to put in a deposit and the savvy to realise they need positive cashflow are in with a real chance - but who said it was all bad news?

WTF?_2

Gorgeous_George wrote: »

...or any other property bought since 2005 for that matter?

Anyone who bought a place as a home and not an investment surely was happy with what they paid for it and budgeted to afford the payments, right?

I mean, if I'd bought a house to live in, in recent times, I'd feel a bit (ok - very) annoyed at seeing the price plunge but presumably I'd have been happy to pay the asking and would have worked out that I could afford the repayments before taking on the mortgage.

Personally, I looked at buying in late 2006 but thought that the market was shockingly overpriced and I didn't feel like sinking my savings plus a wodge of borrowed cash on top into something that was likely to lose a lot of value in the near to mid term. I concluded that renting suited my circumstances much better. But of course, other people would be in different circumstances.

If BTLers bought for the long term (that's longer than !!!!!!'s attention span), they need to ignore house price deflation.

I've never said that all BTL was bad .. indeed, I'm considering getting into it myself in the future should it make financial sense and suit my circumstances at that time, but I have pointed out that it's very hard to justify any BTL done in the last few years on 'return on investment' grounds.

Of course we always get the 'I'm in it for the long term' response from a lot of unwise BTLers but I suspect that a lot of that is just BS and bravado.

IMHO, the main threat to BTL is that house prices become so low that people choose to buy rather than rent. I think there will be plenty of tenants for some time to come. Recession decreases the number of people who can afford to buy a house.

There will certainly always be a base of tenants - but chances are that they will have less disposable cash and may be more inclined to economise - ie. go for HMO places or back to family.

And if my neighbourhood is anything to go buy there is a lot of competition for lettings. I'm seeing plenty of 'for sale' signs becoming either 'for sale/to let' or just 'to let' and lots of new signs going up too. Looks like there was an awful lot of speculation which is now unwinding.

It will be quite some time before buying once again becomes cheaper than renting. I'll personally consider it VFM to buy when the monthly interest component on a typical 90% LTV loan equals monthly rental value.

The biggest mugs are those currently entering the BTL market because they cannot sell at a high enough price. That is just one of the many wrong reasons to be a landlord.
GG

It is indeed pretty dumb to become a LL because you can't get the price you want/need on your old house when you move and thus let it ... but is it any dumber than buying close to the peak of the market and overborrowing to get it?


Everyone and his dog is now claiming to have seen this coming a mile off .. why then did so many mugs jump into an overheated property market in 2005/6/7 and reckon that capital appreciation would allow them to subsidise their tenants as well as make money long term?

ad44downey

BTL mortgages and self cert mortgages should never have existed in the first place. Good riddance. This is good news.

Gorgeous_George

It doesn't matter whether it is a BTL or a home for oneself. It is the number of pounds spent on a property/ies that will determine losses.

I suggest that there is more risk in a bank lending £1M to a single homebuyer than to a BTLer buying 10 x £100K houses to let. Of course, it would be better to lend £100K to ten different BTL LLs.

You have needed a deposit for most BTL mortgages for a long time (if not forever).

GG

WTF?_2

Gorgeous_George wrote: »

It doesn't matter whether it is a BTL or a home for oneself. It is the number of pounds spent on a property/ies that will determine losses.

If you actually bought your house as a home to live in long-term then whether or not it is going up or down in value is largely irrelevant. You will have paid a price that you were happy with and both you and the bank will have made sure that you took on a loan that you can afford to pay back.....in theory.

The real problem is that lots of people have been stupidly treating property as some sort of license to print money and the banks have been happy to go along with that.

Now the taxpayers get lumped with the mess. Actually, everyone is lumped with the mess as the the economy starts to unwind once the cheap unsustainable credit which boosted it has gone away.

Gorgeous_George

I disagree.

When 90% of people buy a house as a home, they need/want to move again one day. If the property has lost value, that move is more difficult or impossible.

A true BTLer will have bought to let (there's a clue in the name). They may never wish nor need to sell (providing the numbers stacked up in the first place).

Then there are property investors who bought in hope of capital gains. More reluctant landlords I fear.

GG

brit1234

Gorgeous_George wrote: »

You have needed a deposit for most BTL mortgages for a long time (if not forever).

GG

Yes but lots of investors however took equity out of existing properties for the deposit, as prices fall this wipes out this deposit equity reducing the mortgages closer to 100%.

Then there was the gift deposit scams on new builds. All these no money down deals make this sector very vulnerable especially during these record breaking price falls.

Gorgeous_George

For a BTL to work, it doesn't matter if the mortgage LTV is 5%, 100% or 200%.

If the rent covers costs, there is no problem. The rent needs to cover costs at the start because most lenders demand it. Unless they went for a short term fix, most BTLers should be ok.

GG