Carney vows to take action on the BTL sector

cells

westernpromise wrote: »

The interesting thing to me is that the incidence of mortgage default is higher in the BTL sector than the OO sector.

This can only be because the tenants either fail to pay the rent (so the landlord can't serve the mortgage); or they do pay it, but the market rent that they can afford is insufficient to serve the interest-only mortgage.

Whichever it is, it doesn't look good for people like that if their landlord sells. Either they can't buy because they have a bad credit history, or they can't afford the repayment mortgage they'll need to buy it.

There are three groups of renters. Short term medium term and Long term. Only long term renters would benifit from buying and their numbers are small.

Most the reason long time renters can't buy will be down to regulations nothing to do with BTL. For instance say a divorcee age 55 he could probably service a 20 year mortgage but the banks will only give him a 10 year mortgage making his payment twice as high and thus unaffordable

Likewise a student could potentially buy for 3 years (with parental assistance) but there would need to be the regulatory framework to allow for it and the tax system such that it isn't prohibitive to buy and sell over a short term

Thrugelmir

cells wrote: »

For instance say a divorcee age 55 he could probably service a 20 year mortgage but the banks will only give him a 10 year mortgage making his payment twice as high and thus unaffordable

How does someone aged 55 service a 20 year mortgage?

ukcarper

Thrugelmir wrote: »

How does someone aged 55 service a 20 year mortgage?

It depends entily on the persons financial position and the size of mortgage they need.

Thrugelmir

ukcarper wrote: »

It depends entily on the persons financial position and the size of mortgage they need.

So banks now lend responsibly. Not as was suggested.

but the banks will only give him a 10 year mortgage making his payment twice as high and thus unaffordable

cells

Thrugelmir wrote: »

How does someone aged 55 service a 20 year mortgage?

Pension? Lodger? Family help down the line? Downsizing?

Worst case is they pay down the mortgage for 10 years and then retire and have to sell and live in a government paid for rental or social. That's still better than renting for 10 years now and then being on the same situation in a decades time

Also the banks should allow interest only. The government might then decide its better to pay this pensioners interest only nortgage of say £400pm rather than pay his housing benefit of £800pm

ukcarper

Thrugelmir wrote: »

So banks now lend responsibly. Not as was suggested.

I don't know if a 55 year old would be automatically denied a 20 year mortgage. But plenty of 66 year olds could service a mortgage on their pension.

Thrugelmir

chucknorris wrote: »

What a lot of people are missing is that BTL's have been extremely profitable,

Same for people that leveraged up on a single residential property. Trouble is now is that there's a whole generation that have never experienced falls. Only rises. With over confidence comes complacency. Life can change overnight on a single unexpected event. That's what catches people out.

buglawton

westernpromise wrote: »

The interesting thing to me is that the incidence of mortgage default is higher in the BTL sector than the OO sector.

This can only be because the tenants either fail to pay the rent (so the landlord can't serve the mortgage); or they do pay it, but the market rent that they can afford is insufficient to serve the interest-only mortgage.

Whichever it is, it doesn't look good for people like that if their landlord sells. Either they can't buy because they have a bad credit history, or they can't afford the repayment mortgage they'll need to buy it.

The stats may be skewed by those Northern properties where the LLs boast yields of 10-15% having bought houses for £40-£80k.
Are those stats 'number of property units' or 'amount of value defaulted on'? Any geographical breakdown?

buglawton

cells wrote: »

Are you sure that's the case rather than you reading into it what you want to see?

Has the Canadian or Osborne specifically said they want to shrink the sector?

If that was the aim then I think the 3% additional stamp duty would have been 10%. At 3% its mostly raises tax at 10% it stops almost completely additional BTL which would rapidly shrink the sector.

Problem will all stamp duty is that it taxes the frequency of transactions, not actual wealth. That's what's also wrong with residential stamp duty. Easy, but unfair target. It's regressive as it stops people from being financially flexible and mobile - people can and do hang onto property if there are lump sum disincentives to do transactions. Not helping the real economy at all.

Thrugelmir

cells wrote: »

Pension? Lodger? Family help down the line? Downsizing?

Worst case is they pay down the mortgage for 10 years and then retire and have to sell and live in a government paid for rental or social. That's still better than renting for 10 years now and then being on the same situation in a decades time

Also the banks should allow interest only. The government might then decide its better to pay this pensioners interest only nortgage of say £400pm rather than pay his housing benefit of £800pm

Doesn't answer your initial assertion that a 55 year can easily service a 20 year mortgage. Anything other than straight forward mortgage lending isn't in a lenders interests. As will involve additional cost (administration) that simply increases the cost of the product. Which doesn't help the borrower either.