Landlords could be a threat to banks and wider financial stability

antrobus

cells wrote: »

I thought most of it was issued at short term fixed rates. so a 3 month government gilt is indeed 'fixed' but for all intents its virtually a floating rate with the added headache of refinance risk (could they do longer term paper but at floating rates to reduce refiannce risk, eg a bit like a 25 year tracker mortgage?)

and if the government was to print to pay off its debt then surely house prices and rents would respond positively to that in nominal terms (if not in real terms)

I believe that your are confusing gilts with Treasury bills.

The average maturity of UK debt is 18 years, by far the highest in the OECD club.
http://www.telegraph.co.uk/finance/economics/11525768/Gilts-strike-as-foreigners-shun-UK-on-gridlock-fears.html

mwpt

cells wrote: »

and if the government was to print to pay off its debt then surely house prices and rents would respond positively to that in nominal terms (if not in real terms)

Positively? In the sense that they'd become cheaper and we'd be better off? No, I think the opposite, they'd probably go up in price.

cells

Generali wrote: »

I agree with this. Lots, although far from all, LLs seem to have gotten into BTL as a result of the dot com boom bursting and the Equitable Life debacle eroding confidence in asset managers to fund retirements or because they saw those people doing well and fancied a bit of the same. There has been no serious downturn in the market since the BTL boom got going, it'll be interesting to see what happens when there is.

I suspect that if you spoke to most BTL LLs and asked them about risk management or how they managed concentration risk they'd look at you like you were an idiot.

Prices have been falling for a decade in three regions of England that make up a huge chunk of the population and housing stock yet afaik there has been no crisis there relative to say the SE

cells

Crashy_Time wrote: »

Clearly ...:rotfl: Makes you wonder why there is so much debt riding on BTL if these "landlords" are all so flush? When Lord Willets says "Houses cost too much" on the Daily Politics (yesterday) you know the direction of travel that is coming round the bend....don`t you?

I have no more confidence in our average lord than I do in your good self

London prices relative to wages are far too high, SE prices relative to wages are somewhat high. All the other regions vary from very cheap to cheap to affordable

But London prices relative to yield are not so bad.


So it really boils down to one question. Should yield or wages be driving prices? If you want wages to set prices then you are going to need to ban BTL (and ban buy with cash outright to rent out) and you will need to prepare for a forced exodus of maybe ~ 1 million from London to the rUK and 1 million from the SE to the rUK

Graham_Devon

cells wrote: »

I have no more confidence in our average lord than I do in your good self

London prices relative to wages are far too high, SE prices relative to wages are somewhat high. All the other regions vary from very cheap to cheap to affordable

But London prices relative to yield are not so bad.


So it really boils down to one question. Should yield or wages be driving prices? If you want wages to set prices then you are going to need to ban BTL (and ban buy with cash outright to rent out) and you will need to prepare for a forced exodus of maybe ~ 1 million from London to the rUK and 1 million from the SE to the rUK

This is about the whole country. Not London, as you keep talking about.

London is in it's own world.

cells

antrobus wrote: »

The BoE (or at least that bit of it known as the PRA) will have seen the banks' books as a result of perfectly standard regulation, irrespective of stress testing.

All the banks that matter have their own risk models from which they derive the risk asset weights which are then used to calculate their capital ratios. Therefore, for example, they will all have a risk asset weight which they apply to their BTL book, and the historical 'credit loss' on that book is fundamental to working out what that the risk asset weight should be.

So the BoE knows, to the last penny, what credit loss any bank has suffered on any part of its lending book. Thus, when the BoE says that the rates of credit loss on BTL are twice that on OO lending, they say that because they have actually seen the numbers.

I can accept that as true but without a way to quantify it properly its almost meaningless

for example if the loss on owners is 0.0001% and the loss on BTL is 0.0002% its true that BTL is twice the loss but at the same time its true that both are trivial.

It would be better to actually quantify it.
eg The twenty largest banks representing 95% of loans lost X-million from repos to owners in 2014 and y-million from repos to BTLs in 2014. And helpful to say how much profit each sector generated for the banks too

cells

Graham_Devon wrote: »

This is about the whole country. Not London, as you keep talking about.

London is in it's own world.

it is not about London or elsewhere its pointing out that if you look at property vs wages London sticks out and looks very expensive. If you look at property vs yield then London does not stick out much and does not look very expensive

so should property be compared on a wages or yield basis to look at if its over/under priced?


no other sector is looked at on wages. stocks are looked at for PE (basically yield). Bonds/Gilts are looked at for yield. Corp paper at yield vs risk.

CLAPTON

Crashy_Time wrote: »

CLAPTON wrote: »

is there any evidence the professionals with all the jargon and millions of computers models, do any better?

The people of the UK don't have an obsession with property : rather they have a fairly rational appreciation of its value.[/QUOTE]


Tell that to all those in the North of England, Scotland and elsewhere who are in Negative equity :T It was the property obsession that put them there.

what percentage of all property owners in the grim north are in negative equity and by how much?

antrobus

cells wrote: »

I can accept that as true...

That's a relief.

cells wrote: »

..but without a way to quantify it properly its almost meaningless....

No, I think that the statement that "rates of credit loss on buy-to-let loans in the United Kingdom have been around twice those incurred on lending to owner-occupiers" has a very clear meaning. At least I have no problem understanding it.

cells wrote: »

..for example if the loss on owners is 0.0001% and the loss on BTL is 0.0002% its true that BTL is twice the loss but at the same time its true that both are trivial.

It would be better to actually quantify it.
eg The twenty largest banks representing 95% of loans lost X-million from repos to owners in 2014 and y-million from repos to BTLs in 2014. And helpful to say how much profit each sector generated for the banks too

I can see that you are desperately trying to argue that you were not wrong.

It would be much easier if you just accepted the fact that BTL lending is riskier than OO lending as it carries a higher risk of credit loss.

antrobus

cells wrote: »

it is not about London or elsewhere its pointing out that if you look at property vs wages London sticks out and looks very expensive. If you look at property vs yield then London does not stick out much and does not look very expensive...

Really?

Looks quite pricey to me. 2.87% in Kensington and Chelsea, compared to 7.98% in Manchester.

http://www.telegraph.co.uk/finance/personalfinance/investing/buy-to-let/11633681/Buy-to-let-hotspots-for-2015-revealed.html