1 in 8 mortgages now BTL

grizzly1911

"With an average house price of nearly £160,000, which is more than six times higher than the average salary, a generation of young people cannot afford to buy their own home.

To make matters worse, the average monthly rent has climbed to £741 per month, which inhibits their ability to save money every month towards a deposit."

With a 10% deposit, 4% rate and repayment mortgage over 25 years £750 doesn't seem far out just on repayments so wouldn't expect the rent to equate to much less.FTBs don't necessarily need average rental price properties.
Average house price v. average wage for FTBs don't necessarily equate.

Typically FTBs would start off with a house lower than the average, quite possibly with dual incomes so the multipliers don't quite add up.Building up a decent deposit also helps.True BTLs are commercial loans not Home mortgages.
Restricting BTLS won't increase the overall housing stock or alleviate the position.The problem is insufficient stock, stock in the wrong place, stock that people don't want to buy or is unsuitable.

Graham_Devon

CLAPTON wrote: »

I note the definition; I had missed the point that you consider there is an excess of properties in the UK in relation to the demand.

What? Not sure if you are just being obtuse here, but I stated "build". That suggests I don't consider there is an excess of properties at the moment.

????

dryhat

Let me tell you all something...

The reason the number of "BTL mortgages" has increased is because people are using "BTL mortgages" to buy their own home rather than renting the house out.

This is because it is easier to get the mortgage - no proof of income, lower deposits etc,


LIAR LOANS some peole would call them.

Thrugelmir

Graham_Devon wrote: »

Will anything ever be done? Don't forget, BTL landlords are on much more favourable terms now over the FTB....they still have IO loans.

So? What's favourable about an interest only mortgage? What's going to happen at the end of the mortgage term?

JanCee

dryhat wrote: »

Let me tell you all something...

The reason the number of "BTL mortgages" has increased is because people are using "BTL mortgages" to buy their own home rather than renting the house out.

This is because it is easier to get the mortgage - no proof of income, lower deposits etc,


LIAR LOANS some peole would call them.

Higher deposits on BTL usually.

dryhat

Thrugelmir wrote: »

So? What's favourable about an interest only mortgage? What's going to happen at the end of the mortgage term?

In answer to your first question : IO mortgages cost you less each month. That is the main reason.

second question : Who cares? House prices always go up.

Thrugelmir

dryhat wrote: »

In answer to your first question : IO mortgages cost you less each month. That is the main reason.

second question : Who cares? House prices always go up.

First answer. Repaying capital is not a cost. Interest is a cost. Less debt owed = less interest to pay.

Second answer. I should hope someone cares. As mortgage contracts only have a limited time span. One day tomorrow will be here.

House prices do not always go up. At points of time they fall. Given property is an illiquid asset. Just hope people judge the market well when they look to exit.

dryhat

Thrugelmir wrote: »

First answer. Repaying capital is not a cost. Interest is a cost. Less debt owed = less interest to pay.

Second answer. I should hope someone cares. As mortgage contracts only have a limited time span. One day tomorrow will be here.

House prices do not always go up. At points of time they fall. Given property is an illiquid asset. Just hope people judge the market well when they look to exit.

My last post was just a way of illustarting the prevailing trends not a financial argument for or against IO mortgages or whether house prices will go up or down.

Many more people are using I/O BTL mortgages to buy their own home because they couldn't get a residential mortgage.

This is fact.

Thrugelmir

dryhat wrote: »

Many more people are using I/O BTL mortgages to buy their own home because they couldn't get a residential mortgage.

This is fact.

The history of BTL is still in its infancy. Given that the creator of the term BTL, Bradford and Bingley couldn't make it work profitability. Leaving the UK taxpayer on the hook for 250,000 interest only mortgages.

My personal view is that the jury is out. As starting in 11 years time there is going to be a lot of people exiting their cheap deals, and finding themselves with a far less profitable business.

Graham_Devon

Thrugelmir wrote: »

So? What's favourable about an interest only mortgage? What's going to happen at the end of the mortgage term?

This isn't really about buying and paying off a loan. It's about making an investment work.

If BTL landlords had to take repayment mortgages, it would make the yield far lower, and therefore, not quite as worth it.

As grizzly point out earlier, rent is roughly the same as the equivalent mortgage. However, this isn't the case for the BTL landlord who can tale a product and make smaller mortgage payments, cashing in on the difference between a repayment mortgage and an IO mortgage. As interest on the mortgage is also tax deductible, it increase the amount the BTL owner is better off by, and this continues throughout the loan. They don't particularly want to pay down the loan, as that's less to deduct the tax on.

So for instance, these are just example figures.

FTB needs to pay £750 a month for the repayment mortgage.

BTL needs to pay £400 a month for the BTL mortgage. BTL

FTB therefore needs to pay BTL owner £735 a month as they can't get access to the mortgage allowing them to pay £750 a month, and this "problems" is growing at an increasing pace. Problems in quotations as some don't see it as a problem, rather an opportunity.

Now, if the BTL also had to pay £750 a month for the mortgage, what would be the incentive for the BTL?

A lot of BTL investors on forums would simply turn around and just suggest they would have to charge £1000 rent, but the market simply wouldn't allow that. So the other alternative is they look for other investments and houses are left to people looking for a home and long term BTL owners / companies who DO want to pay down the mortgages or are more often mortgage free.

Simplistic, but it's meant to be so to make the basic point.

It used to be a level playing field. But with the (sensible) move away from IO for residential mortgages, it leaves a massive advantage for the BTL investor.