Buy to Let landlords face extra Margin Call payments

IveSeenTheLight

Thrugelmir wrote: »

Alternatively lenders could raise interest rates to reflect increased risk. More than one way of skinning a cat.

Raising interest rates would mean that they would earn more but would not be correcting any LTV (margin call) issue

I guess those on discounted (BoE linked), tracker (BoE linked), fixed etc would not be affected for the term of their agreement.

You also need to remember, that institutions need to lend to make money and need to be competative to obtain the business.

You also need to remember that your suggestion could easily also be applied to standard home mortgages. Be careful what you wish for

Thrugelmir

IveSeenTheLight wrote: »

Raising interest rates would mean that they would earn more but would not be correcting any LTV (margin call) issue

I guess those on discounted (BoE linked), tracker (BoE linked), fixed etc would not be affected for the term of their agreement.

You also need to remember, that institutions need to lend to make money and need to be competative to obtain the business.

You also need to remember that your suggestion could easily also be applied to standard home mortgages. Be careful what you wish for

If a bank is lending say £250 million to BTL investors on variable rate mortgages. A .25% increase in interest will gross the bank £6,625,000 in additional interest over the course of a year. On the basis that the an average BTL mortgage is say £100k this would cover the total default of 66 borrowers (2.6% of the mortgage book). Unlikely that that there would be no recovery of some of the debt.

This is why banks are happy to repossess and auction property off quickly. As releases funds to relend. Losses are factored into mortgage rates. Residential mortgage lending is highly profitable to the remaining banks in the market.

chucky

mysterybadger wrote: »

There is a possiblity that lenders could make margin calls.

Is there? No-one ever seems to have found such a claus in any BTL agreement. This is something of an urbanmyth, methingks.

So are Brits threads and posts but we're used to them - 100% entertainment quality :rotfl:

silvercar

Thrugelmir wrote: »

If a bank is lending say £250 million to BTL investors on variable rate mortgages. A .25% increase in interest will gross the bank £6,625,000 in additional interest over the course of a year. On the basis that the an average BTL mortgage is say £100k this would cover the total default of 66 borrowers (2.6% of the mortgage book). Unlikely that that there would be no recovery of some of the debt.

This is why banks are happy to repossess and auction property off quickly. As releases funds to relend. Losses are factored into mortgage rates. Residential mortgage lending is highly profitable to the remaining banks in the market.

Why do you assume that BTLers are on variable rates. That's as likely as residential OOs. BTLers could well be on long term trackers or locked into fixed rates.

As for banks repossessing and auction off; you've forgotton that BTL mortgages involve tenants with rights. Much easier to sell off resi repos.

brit1234

How much has your property portfolio devalued today chucky? :rotfl:

chucky

brit1234 wrote: »

How much has your property portfolio devalued today chucky? :rotfl:

no idea - how much will it have devalued in 25 years?

do you want to know about my yield?
did you want to know about the length of rental agreements?
do you want to know how much the LTV's are?
or do you want to know about the incentives or BTL

best not because it goes off-topic we'll continue talking about this being another one of your trolling threads?

mewbie_2

Thrugelmir wrote: »

Alternatively lenders could raise interest rates to reflect increased risk. More than one way of skinning a cat.

I'm not sure that's true. At least I only found one way.

http://biology.clc.uc.edu/fankhauser/Labs/Anatomy_&_Physiology/A&P201/Cat_Skinning/Cat_Skinning.htm

stevetodd

chucky wrote: »

no idea - how much will it have devalued in 25 years?

do you want to know about my yield?
did you want to know about the length of rental agreements?
do you want to know how much the LTV's are?
or do you want to know about the incentives or BTL

best not because it goes off-topic we'll continue talking about this being another one of your trolling threads?

Chucky that is very harsh, you know very well those are the only threads that he can do, he is doing his best with limited resources. You should be ashamed of yourself, it's like me playing/teaching chess with my god daughter, you have to let them think they are getting the better of you occassionally to encourage them to develope the necessary skills.

I think that you should have pretended that he out smarted you (ridicleous to you and me granted but what's the harm in letting him think he wins occassionally)

chucky

stevetodd wrote: »

Chucky that is very harsh, you know very well those are the only threads that he can do, he is doing his best with limited resources. You should be ashamed of yourself, it's like me playing/teaching chess with my god daughter, you have to let them think they are getting the better of you occassionally to encourage them to develope the necessary skills.

I think that you should have pretended that he out smarted you (ridicleous to you and me granted but what's the harm in letting him think he wins occassionally)

yes i think you're right

IveSeenTheLight

Thrugelmir wrote: »

If a bank is lending say £250 million to BTL investors on variable rate mortgages. A .25% increase in interest will gross the bank £6,625,000 in additional interest over the course of a year. On the basis that the an average BTL mortgage is say £100k this would cover the total default of 66 borrowers (2.6% of the mortgage book). Unlikely that that there would be no recovery of some of the debt.

This is why banks are happy to repossess and auction property off quickly. As releases funds to relend. Losses are factored into mortgage rates. Residential mortgage lending is highly profitable to the remaining banks in the market.

There are far more OO mortgages than BTL.
What you've stated would generate more income for the banks but would not answer any margin call issue and would not generate as much as raising interest rates on OO mortgages.

I would guess that when rates rise, they will be on all types of mortgages