Problems looming for buy-to-let

amcluesent

Between 20% and 40% of buy-to-let (BTL)landlords will fall into negative equity if house prices keep on falling at their current rate

"We believe that the BTL sector could suffer above-average loss severities on repossession cases due to a concentration of certain property types that are witnessing above-average price declines," said Kate Livesey, an analyst at S&P.

"Just over 50% of buy-to-let loans outstanding are from the worse-performing 2006 and 2007 vintages," said S&P.

Mr and Mrs Haircut will be making a trip to BTL land!

lisaloo1977

Already posted

fatpig_2

Bad news for slum landlords is good news for everyone else.

dopester

The credit ratings agency Standard & Poor's says that by June this year BTL mortgages had a repossession rate greater than ordinary home loans.

"We believe that the BTL sector could suffer above-average loss severities on repossession cases due to a concentration of certain property types that are witnessing above-average price declines," said Kate Livesey, an analyst at S&P.

For every BTL or BTL portfolio that is repossessed, I'm thinking in many instances there should be a private home prone to be repossessed to recover debt as well - but I rarely see that side of it reported.

chucky

dopester wrote: »

For every BTL or BTL portfolio that is repossessed, I'm thinking in many instances there should be a private home prone to be repossessed to recover debt as well - but I rarely see that side of it reported.

that is very true Dopester - many posters do not see this.

we should be punishing these dirty BTLers

Kenny4315

The main problem with the whole housing issue is that deposits and sufficient security has not been maintained throughout the lending/borrowing process. Never mind sub-prime lending in the US and the credit crunch, the people in the UK just had TO MUCH DEBT, compared to there substainable earnings.

Let's take a BTL, many of these have been funded by using the primary residence for equity release. So release cash from main the pay for 'self maintaining' BTL, lets say 15% on each as security. Housing market goes up, fine and dandy, do it again, and again and again. The person is now leveraged beyond an acceptable amount, in all but a substantially rising market. Result if you have 15% say £300k on a £2m debt your
FU _pale_ :eek: , the equity and both your home and your BTL portfolio is wiped out, when the market corrects as it is now doing.

The same is true in remortgagers who have had a house half paid and then remortgaged on and on releasing cash from there house to keep up with the neighbours. All they have to show for it is a depreciating 4X4 and a faded suntan.

My view is that a BTL portfolio should hold a 30% equity at least, this give them time to reorganise in a downturn, rather than having forced sales as an issue. Homeowners should always try to pay of their main residence as soon as possible rather than releasing money from it for other things, and buyers need to be realistic about what they can afford to buy or whether they can afford to buy anything.

Kenny4315

amcluesent wrote: »

"Just over 50% of buy-to-let loans outstanding are from the worse-performing 2006 and 2007 vintages," said S&P.

I bought in late 2006 (3 flats in a large victorian townhouse), but bought wisely, ie, for the same price as the previous owner had paid in early 2003, well a 3% increase, so as near as dammit. The problem is so many BTL have been off-plan, bog standard new builds, etc, bought at a premium.

chucky

Kenny4315 wrote: »

I bought in late 2006 (3 flats in a large victorian townhouse), but bought wisely, ie, for the same price as the previous owner had paid in early 2003, well a 3% increase, so as near as dammit. The problem is so many BTL have been off-plan, bog standard new builds, etc, bought at a premium.

well done Kenny - you seem to have bought well.

pickles110564

fatpig wrote: »

Bad news for slum landlords is good news for everyone else.

Fatpig we aint all slum LL's, if you are you would not get business without advertising. All my next tenants come to me because they know I provide good products and at below market rates.

chucky

pickles110564 wrote: »

Fatpig we aint all slum LL's, if you are you would not get business without advertising. All my next tenants come to me because they know I provide good products and at below market rates.

why are you explaining yourself Pickles!!

Fatpig sells the Big Issue he has no home. Sad but true.

ad44downey

The tax regime needs to be fundamentally reformed so that buy-to-let chancers are properly taxed. Taxing their rental income at say a marginal rate of say 75% would be good for starters.