Buy-to-let investors will need 50pc deposit - or no mortgage

mystic_trev

Lenders are shrinking back from the embattled buy-to-let sector and tightening their criteria for new applicants.

The key ratio - the link between rental income and mothly mortgage cost - is being changed by a number of lenders, with the effect that landlords will either have to ramp up the rents they charge tenants, or borrow less.

Mark Harris, of mortgage broker SPF Private Clients, predicted that "the market is moving towards a situation where only those with a 50pc deposit are likely to qualify for a loan".

Barclays has been among the first lenders to move, dramatically raising the application criteria for new borrowers earlier this week.

Where previously Barclays required landlords to have a rental income of 125pc of the monthly interest, calculated at a mortgage rate of 5.79pc, it has increased this to 135pc at 5.79pc.

http://www.telegraph.co.uk/finance/personalfinance/investing/buy-to-let/12027732/Buy-to-let-investors-will-need-50pc-deposit-or-no-mortgage.html

Another squeeze on Investors.

somethingcorporate

and current renters by the look of things...

chucknorris

mystic_trev wrote: »

http://www.telegraph.co.uk/finance/personalfinance/investing/buy-to-let/12027732/Buy-to-let-investors-will-need-50pc-deposit-or-no-mortgage.html

Another squeeze on Investors.

Actually it is a squeeze on new investment, at least it doesn't hurt existing investments, in fact it will create further upward pressure on rents.

Generali

mystic_trev wrote: »

http://www.telegraph.co.uk/finance/personalfinance/investing/buy-to-let/12027732/Buy-to-let-investors-will-need-50pc-deposit-or-no-mortgage.html

Another squeeze on Investors.

Je suis vends-à-louer.

Generali

chucknorris wrote: »

Actually it is a squeeze on new investment, at least it doesn't hurt existing investments, in fact it will create further upward pressure on rents.

It's complex. There are lots of different substitution effects at play: I can buy or rent and I can do either of those things where I live now or somewhere else (e.g. I can make my commute a but longer or shorter by moving in or out by a suburb or two depending on relative prices and how I value my time).

chucknorris

This is getting ridiculous, who the hell is going to invest in rental property (I wasn't going to anyway):

1. Higher deposits.
2. Mortgage interest tax expense capped at 20%.
3. Wear and tear allowance scrapped (although investors who never claimed it probably don't realise what an advantage it was.
4. An additional 3% stamp duty.

Maybe cash buyers (takes out 1 and 2) but they can't be a large proportion of the market.

wotsthat

It's brilliant news for existing BTL's. The government created a housing shortage and now they're going to create a shortage of rented. It's got to be simpler at some point to just let people build houses.

I'm hoping when I buy the next house (probably a leap up the ladder) I'll be able to out-compete FTB's because I'll buy cash and investors will be deterred by SDLT and high deposit requirements. The icing on the cake would be if potential BTL investors piled into shares instead and increased my new worth.

I sometimes feel bad wishing for more good luck on top of the good luck I've already had.

JackLeach

chucknorris wrote: »

This is getting ridiculous, who the hell is going to invest in rental property (I wasn't going to anyway):

1. Higher deposits.
2. Mortgage interest tax expense capped at 20%.
3. Wear and tear allowance scrapped (although investors who never claimed it probably don't realise what an advantage it was.
4. An additional 3% stamp duty.

Maybe cash buyers (takes out 1 and 2) but they can't be a large proportion of the market.

Who on earth will current LLs sell to then?


They will have to lower the price a hel of a lot if they really want to sell

Graham_Devon

chucknorris wrote: »

This is getting ridiculous

The entire BTL system has been ruined by greed.

At every angle, whether it's the landlord, the lender or the agency, the focus is always on the last penny in profit that can be squeezed from the system.

That may be fine in other business, but BTL is dealing with property, often based on government subsidy (housing benefit) and excess debt. It's therefore highly political.

I have no idea why Landlords have, for so long, let agencies get away with bleeding your own customers dry before they pass the customer onto yourselves. This is a mere example which has literally exploded over the past few years.

I truly believe that the industry has brought all of this on itself. The government (of many colours) have stood back a bit too much, with too little regulation. Now they are having to come down hard.

It looks like BTL could be the next "big issue" when it comes to financial fall out. Clearly the way the BOE and government are hitting the BTL sector they are very worried about it's potential impact on the economy.

I've made the mistake of looking on Property118 in recent times. The greed there is literally astounding.

chucknorris

JackLeach wrote: »

Who on earth will current LLs sell to then?


They will have to lower the price a hel of a lot if they really want to sell

With upward pressure on rents, why would they want to sell? The only reason that I am talking about selling soon, is because there is a lot of equity, that needs to be spent before I die, if I was younger or had children, I wouldn't sell.

chucknorris

Graham_Devon wrote: »

I have no idea why Landlords have, for so long, let agencies get away with bleeding your own customers dry before they pass the customer onto yourselves. This is a mere example.

Only in exceptional circumstances I have used an agent, I don't think that they represent value. Last time I used an agent was in 2005, when I was on holiday in Turkey.