1 in 8 mortgages now BTL

Graham_Devon

Parnott wrote: »

Aren't people having to rent out their original property in order to buy the next place and move up the ladder because they simply can't sell in the current climate?

It would be nice to do things in the right order but that's not always possible I guess.

Everyone can sell. It's just they would have to drop the price. So they see money in keeping it, converting it to IO and renting it out.

Quite a lot falling down now though, with continued slow falls in house prices, as witnessed by the "help" threads on the house buying boards from people who have done just this and are worse of fthan they were if they had just sold....slowly realising they took on a business, not just an income.

Thrugelmir

Parnott wrote: »

Aren't people having to rent out their original property in order to buy the next place and move up the ladder because they simply can't sell in the current climate?

More likely impatience. Property does take time to sell. More recent memories suggest otherwise. Which wasn't the norm.

Given you can obtain a better mortgage rate with a lower LTV. Does seem a short sighted view when increasing debt levels at a time of abnormal interest levels.

Eellogofusciouhipoppokunu

Graham_Devon wrote: »

No, there are other things that can be done.

Rent controls like other countries impose would obviously make prospective BTLs think twice.

Higher rental regulation would do the same.

Removing some of the tax allowances or upping CGT. Maybe imposing a tax on BTL in it's own entity...there are plenty of products and services which attract their own tax.

We could create regulation for example that states any BTL property has to be held and let for 10 years (or any number) for tax purposes. I.e. if you sell beforehand, you pay back any tax allowances......or make it so that all BTL mortgages from this point forward are on a repayment basis (much like has happened to residential).

These are just examples, not proposals. It's highlighting that things could be done. Not necessarily highlighting what should be done.

Obviously, just building a glut of homes that can only be bought ona residential mortgage is probably the easiest way to do things.

I'm interested in your point about rent controls. Do you have details of which countries use these sorts of controls and how they are set up and policed? There is obviously going to be a cost in all of this and as it wouldn't seem fair to tax payers if they foot the bill, it will probably fall onto the rental tenants.

Could it not be the case that rental controls and other increased legislation could actually cost tenants more in rent?

It would be ironic if the people demanding rent controls, thinking that rents would be set at a lower denominator, actually succeeded in bringing in legislation that set rents at a higher denominator.

I guess this is similar to calls for greater lending restrictions which then negatively impact the people who were making most noise.

wotsthat

Graham_Devon wrote: »

Already seen, and commented on it...

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.

http://forums.moneysavingexpert.com/showpost.php?p=57124161&postcount=21

I'm sorry Graham you don't have any idea about how business works as evidenced by continued overuse of the word 'simply' - you can't see the woods for the trees.

If a cost is added it creates pressure in the supply chain. If the cost is unavoidable then someone has to pay it.

If, for example, ALL rentals are subject to an identical increase in cost then the market price moves up by an equal amount. Renter can't afford it? Tough - they'll have to find people to share with; BTL's might react by trying to bring down the nominal price by modifying units to house more people etc. Unless the renter has an alternative then, in a market where demand seems to exceed supply, they'll have to suck it up. Look at tax on fuel bills - there was no alternative, in the short term, other than to take it on the chin.

Renters would be much better served by taking costs OUT of the chain and an increase in competition for their custom. A couple of starters; a complete ban on letting agents being able to charge tenants directly (as a landlord why query ridiculous charges when you never see the invoice?), encouraging empty houses onto the market with tax breaks rather than penalties (which creates reluctant landlords), controlled building etc.

In your scenario the increased costs are prevented from hitting the renters pocket by the super regulator (King Canute?) and have to be absorbed by the landlord. The landlords panic, sell up, there's a price crash, everyone (except your internet enemies) can afford to buy an average house on an average wage, you get to buy the other half of your house with clubcard vouchers and we* all live happily ever.

* well you anyway.

Keep on believin'

JonnyBravo

Graham_Devon wrote: »

1 in 8 mortgages now BTL

Dont forget about those landlords (like me) who use regular residential lending to fund BTL as well.
IMO many more doing this than using BTL mortgages to buy a residential house as dryhat is suggesting. So probably more than 1 in 8 I'd suggest.

Graham_Devon wrote: »

But most BTL investors on here don't want to pay down their mortgages? I know it's a business and understand what you are saying, but most class themselves as investors...just look at those on this very forum, not once do you hear the word "business". It's all about their investments.

They'd rather buy another property with further loans. It seems your process stops at "generate an after tax cash return" and move swiftly onto "hope for capital appreciation".

I've not seen anyone trying to pay down their BTL mortgages, bar those who have bought a BTL mainly as investments for their children. Indeed, the buying and selling forum often has advice on how to maximise the return on your debt when getting into BTL. Many have large cash reserves which are not used to pay down the BTL mortgage, but to use as a deposit on the next in the portfolio.

One of the main pieces of advice for "accidental landlords", i.e the increasing number who are lucky enough not to have to sell their home to buy another, is to switch to an IO mortgage to maximise the return. There is little regard to paying the mortgage down in most, if not all BTL threads I see.

Broad brush strokes there Graham.
I'm paying off my repayment BTL mortgage. Paid more than £30k off the capital in the last 4 years. So can I please be noted as an exception?

Turnbull2000

Would be interesting to see some figures behind the numbers who rent out rather than sell. I'd have to say of those I know who have moved up from their first property, half have opted to become landlords. The figures must be quite substantial. With rents set to surge over the coming years, guess it makes good financial sense.

chewmylegoff

Graham_Devon wrote: »

No, there are other things that can be done.

Rent controls like other countries impose would obviously make prospective BTLs think twice.

Higher rental regulation would do the same.

Removing some of the tax allowances or upping CGT. Maybe imposing a tax on BTL in it's own entity...there are plenty of products and services which attract their own tax.

We could create regulation for example that states any BTL property has to be held and let for 10 years (or any number) for tax purposes. I.e. if you sell beforehand, you pay back any tax allowances......or make it so that all BTL mortgages from this point forward are on a repayment basis (much like has happened to residential).

These are just examples, not proposals. It's highlighting that things could be done. Not necessarily highlighting what should be done.

Obviously, just building a glut of homes that can only be bought ona residential mortgage is probably the easiest way to do things.

The trouble with these sort of measures is that although they will reduce the demand for houses at their current prices, we know that the response to a reduction in demand is a reduction (from housebuilders) in supply.

Graham_Devon

wotsthat wrote: »

I'm sorry Graham you don't have any idea about how business works as evidenced by continued overuse of the word 'simply' - you can't see the woods for the trees.

If a cost is added it creates pressure in the supply chain. If the cost is unavoidable then someone has to pay it.

If, for example, ALL rentals are subject to an identical increase in cost then the market price moves up by an equal amount.

Yer.

Which is why I said this: "any BTL mortgages from this point forward".

Please learn to read. If anything is done from this point forward, it's not unavoidable, and makes the rest of your drivel redundant. This is the second time I have had to point you to what I actually stated in as many posts.

Apology accepted.

wotsthat

Graham_Devon wrote: »

Yer.

Which is why I said this: "any BTL mortgages from this point forward".

Please learn to read. If anything is done from this point forward, it's not unavoidable, and makes the rest of your drivel redundant. This is the second time I have had to point you to what I actually stated in as many posts.

Apology accepted.

Add cost to a supply chain whether it be baked beans, energy or housing and eventually it'll find it's way to the consumer. I have a choice whether I buy baked beans - if they go up I might stop buying them so there's a chance that the retailer and producer might (grudgingly) take a margin reduction.

In the current rental market there's limited scope for just walking away. Increased costs will quickly find their way to the tenant.

I'm on the side of the renter - I made a couple of suggestions how the costs of renting could be reduced.

You can't see the woods (the real world) for the trees (your desire to 'punish' BTL's).

the_flying_pig

wotsthat wrote: »

Add cost to a supply chain whether it be baked beans, energy or housing and eventually it'll find it's way to the consumer. I have a choice whether I buy baked beans - if they go up I might stop buying them so there's a chance that the retailer and producer might (grudgingly) take a margin reduction.

In the current rental market there's limited scope for just walking away. Increased costs will quickly find their way to the tenant.

I'm on the side of the renter - I made a couple of suggestions how the costs of renting could be reduced.

You can't see the woods (the real world) for the trees (your desire to 'punish' BTL's).

that's a bit simplistic.

as you say, cost that affects one supplier only, in a market with lots of choice, won't be passed through... e.g. if the 'going rate' to rent a 3-bed semi is £200pw then if one landlord tries to ask £300 because he's had to spend a load of money on repairs after a big tree toppled over onto his roof, trashing it, he'll fail.

but something that affects all suppliers is a bit more subtle. suppliers can't just charge whatever they like - some choices are available, e.g. more housesharing, more owner-occupation,.... basically i'd expect the burden of something like this to be shared between landlords & tenants.