Sellers' gloom over property market inactivity

IveSeenTheLight

Graham_Devon wrote: »

Your foresight is pretty superior!

Ok, let's be pedantic.

I foresee the increase in BTL mortgages and contraction of Owner Occupancy to continue whilst credit is restricted.

Is that clearer?

Thrugelmir

IveSeenTheLight wrote: »

Ok, let's be pedantic.

I foresee the increase in BTL mortgages and contraction of Owner Occupancy to continue whilst credit is restricted.

So why are investors in a better position than owner occupiers to afford mortgages?


Until Bradford & Bingley came along in 1999 with their policy of targeting this segment of the market, there was no substantive "BTL" lending market in the UK.

Thrugelmir

IveSeenTheLight wrote: »

and I can foresee that we see an increase in the percentage of BTL mortgages.

Agree with this. As majority were/are interest only loans. So only means of redeeming the mortgage is to sell.

IveSeenTheLight

Thrugelmir wrote: »

So why are investors in a better position than owner occupiers to afford mortgages?


Until Bradford & Bingley came along in 1999 with their policy of targeting this segment of the market, there was no substantive "BTL" lending market in the UK.

But you agree that we're going to see more BTL's

Thrugelmir wrote: »

Agree with this. As majority were/are interest only loans. So only means of redeeming the mortgage is to sell.

BTL as a business is geared to being interest only due to the tax incentive.

morag1202

Thrugelmir wrote: »

So why are investors in a better position than owner occupiers to afford mortgages?


Until Bradford & Bingley came along in 1999 with their policy of targeting this segment of the market, there was no substantive "BTL" lending market in the UK.

I think pensioners wanting to downsize will become the new BTL investors, like my late mother did in 1998.

She couldn't sell her house for what she thought it was worth and had found a nice bungalow so she took out a B & B BTL mortgage on her place, bought the bungalow outright, put the BTL with an agent and enjoyed an extra bit of income.

Thrugelmir

IveSeenTheLight wrote: »

BTL as a business is geared to being interest only due to the tax incentive.

So I receive £750 in rent and pay £500 in interest. That leaves me with £250 of taxable profit. Where's the tax incentive?

IveSeenTheLight

Thrugelmir wrote: »

So I receive £750 in rent and pay £500 in interest. That leaves me with £250 of taxable profit. Where's the tax incentive?

If you had no interest i.e. paid off the mortgage, you'd be taxed (likely at 40%) on the £750 plus have a lot of equity tied up in the property.
Your net profit on the investment would be quite small.

By having a higher mortgage, you release that equity for investment elsewhere and are then taxed on the smaller profit of £250.

brit1234

I thought interest only mortgages were to be phased out with the MMR. Even if the MMR gets watered down and IO survive a repayment vehicle will be needed.

That will screw up a lot of buy to lets especially as the prices should fall the next couple of years.

IveSeenTheLight

brit1234 wrote: »

I thought interest only mortgages were to be phased out with the MMR.

Well, the MMR seems to have said quick a lot of things that have not come to fruition

brit1234 wrote: »

. Even if the MMR gets watered down and IO survive a repayment vehicle will be needed.

Why?
I though this was aligned to single properties, not investment properties.
If a typical BTL has a 30% deposit (and remember that tax benefits cannot increase beyond the original purchase price), then what is the risk of selling many years later to recoup the deposit +/- any capital appreciation?

brit1234 wrote: »

.
That will screw up a lot of buy to lets especially as the prices should fall the next couple of years

Please explain how it would "screw up a lot of BTL's"
I've seen BTL be profitable even with a repayment scheme in place.
The likelyhood is that the rental market is likely to get even stronger.

P.S. you have been hoping for falls for quite some time now haven't you?

smamst

"The prediction will bring more gloom to John Carey, a developer for 10 years, who has been trying to sell a block of four homes in Bedford, each for between £120,000 and £135,000, since before Christmas.

There had been plenty of interest from potential buyers, he told the BBC News website, but a number of sales had fallen through, owing primarily to mortgage difficulties for people in the chain."

Hey John how about getting realistic, banks are not going to get back into Liar loans and toxic debt any more so reduce your prices down to £80,000-£85,000, you'll actually get some sales from people who can afford to buy.


"I would have expected them [the properties] to have gone by spring, and certainly by May, but here I am sitting in the estate agents in September," he said.

"There is no lender flexibility. A loosening of lending terms will help."

There will be no more flexibility in the mortgage market because the banks will no longer issue out liar loans or loans to people that can't afford to take out too large a loan. Therefore house price will drop SIGNIFICANTLY.

Bulls, stick to you Daily Express ramping, that's all you got left.