Buy-to-let is danger to UK economy, warns Bank

mystic_trev

Headline in both the Times and Telegraph!

Regulators at the Bank of England warned that they are becoming increasingly concerned about the danger buy-to-let mortgage lending could pose to financial stability.

In its quarterly financial policy statement, the bank said that landlords could be disproportionately vulnerable to very large falls in house prices and could amplify a downturn in the market.

Buy-to-let lending has grown by 40 per cent since 2008, 20 times faster than lending to owner occupiers.

The bank’s financial policy committee said it expected house price growth to pick up speed in the short term and warned that this could prompt owner occupiers to take on even larger loans, “thereby increasing overall risks to financial stability”.

http://www.thetimes.co.uk/tto/business/industries/banking/article4567635.ece

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CLAPTON

mystic_trev wrote: »

Headline in both the Times and Telegraph!



http://www.thetimes.co.uk/tto/business/industries/banking/article4567635.ece

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one thought their job was to do something to stop it destabilising the financial system

Carl31

CLAPTON wrote: »

one thought their job was to do something to stop it destabilising the financial system

and why are they concerned with it anyway?

cells

I can't see how BTL is more risk than owner hones.

A BTL purchase is usually 75% or less LTV while an owner can easily get a rate of 85-90%.

A BTL purchase also potentially has other assets the bank can sell off to recover any loans.

The biggest risk to banks are the surveyors. If they don't over value the security Property there is almost nil chance of a loss as you would need a crash in prices in excess of 20-25% to cause a loss to the lender

MPD

Its not individual risk, its a risk to the system.

Same article on BBC News
http://www.bbc.co.uk/news/business-34356801

Graham_Devon

The thing with this article is, yes, they are highlighting a risk. But they are also highlighting and listing the reasons for said risk.

What they are not doing is anything to combat any part of it.

They are the ones with the power to do something. So do something. No point in raising all these risks and warning everyone if the only people with the power to do something sit on their hands.

chucknorris

Surely this has already been addressed, by introducing new rules about reducing the amount of allowable mortgage interest against tax for landlords, BTL loans will see a dramatic fall.

Graham_Devon

I'll take my earlier words back if the BOE carries this out.

Looks like they are looking into putting a cap on BTL lending.

Officials are watching for lenders making it easier for would-be landlords to get loans, with the government weighing up whether to give the Bank powers to cap buy-to-let lending as it can for owner-occupied loans. A sudden fall in house prices could be worsened if landlords are forced to sell their properties the Bank’s financial policy committee (FPC) warned.

http://www.cityam.com/225245/bank-england-may-put-cap-lending-buy-let-landlords

Generali

cells wrote: »

I can't see how BTL is more risk than owner hones.

A BTL purchase is usually 75% or less LTV while an owner can easily get a rate of 85-90%.

A BTL purchase also potentially has other assets the bank can sell off to recover any loans.

The biggest risk to banks are the surveyors. If they don't over value the security Property there is almost nil chance of a loss as you would need a crash in prices in excess of 20-25% to cause a loss to the lender

A BTL is about twice as likely to be repossessed than a OO property and a LL that gets repossessed is likely not to have been maintaining the place. Your points are good though, IMHO.

Gangaweed

I think a bearded bloke and his old pal john are much more dangerous to the British economy.

kabayiri

A friend is due to retire at 50 soon from a public sector job.

He will get a lump sum plus salary-based pension.

He has been told that the worst thing he could do with the lump sum is put it in a bank. All the talk with his colleagues in a similar situation has therefore shifted towards buying property to let.

It's hardly surprising BTL is proving popular when the alternatives are much less attractive.