The Next Nail in the Coffin

chucknorris

cells wrote: »

Well last year the rental stock grew by 440k units and 100k BTL mortgages were given out which suggests the majority are outside BTL funding.

The rates are in the 3% region for 75% LTV
Of the two big lenders I think last time I checked it was 3.14% and 2.79% with 2k fees

If HPI is 15% over 2 years you can remortgage onto a 60-65% band which takes them to around 2.2% rates.

Were those variable rates, if so, did they have an initial discount?

Generali

cells wrote: »

Well last year the rental stock grew by 440k units and 100k BTL mortgages were given out which suggests the majority are outside BTL funding.

The rates are in the 3% region for 75% LTV
Of the two big lenders I think last time I checked it was 3.14% and 2.79% with 2k fees

If HPI is 15% over 2 years you can remortgage onto a 60-65% band which takes them to around 2.2% rates.

Are people allowed to get single BTL mortgages on multiple properties or is it 1:1 mortgage to property?

In Aus you can gather up your properties and put them into a single umbrella mortgage.

cells

chucknorris wrote: »

Were those variable rates, if so, did they have an initial discount?

no they are 2 year fixed rates, from memory I think the biggest lender is BM followed by TMW

There are cheaper lenders out there too, for instance virgin money or nat west. Coventry offer what looks like a good BTL tracker for the term of the loan I think its just 1.5% + BOE but Ive no mortgages with them.

cells

Generali wrote: »

Are people allowed to get single BTL mortgages on multiple properties or is it 1:1 mortgage to property?

In Aus you can gather up your properties and put them into a single umbrella mortgage.

if it exists its certainly not common.

In the past lenders would allow aggregate LTVs and borrowing across a number of properties but most (all?) have taken that away.

The biggest problem for the finance side is imo the risk of getting onto a SVR. This can be mitigated by longer term 5-10year fixes which are imo too expensive to be worthwhile. Or there are lenders starting to offer BTL term tracker mortgages.

In fact I think the regulators should push the mortgage companies towards offering term trackers for most their products. Not everyone is very MSE and im sure there are possibly millions of BTL and Owner mortgages which revert to expensive SVR rates and the borrower is none the wiser.

cells

BM the biggest uk BTL lender

2.24% 2-year-fix £2k fee 60% LTV
3.04% 2-year-fix £2k fee 75% LTV

TMW I think the second biggest BTL lender

1.94% tracker 2 years 65% LTV £2k fee
2.19% 2-year-fix £2k fee 65% LTV
2.79% 2-year-fix £2k fee 75% LTV

westernpromise

chucknorris wrote: »

Nothing genius about it crashy, it was just plain common sense to buy back then in the 90's. But the funny (tragic) thing is, wasn't it in the 90's when you also actually sold? :rotfl:

So on this post there are no geniuses, but at least one of us has some common sense.:rotfl:

It cracks me up when the likes of Crashy "125% BCR" Time insist that landlords took no risks or were just lucky.

The risk we took was to ignore the wise counsel of people such as Crashy, the likes of whom can still be found online in Usenet archives from 1996, assuring us that property was overvalued and still had further to fall. In fact, throughout the whole last 20 years, there have been crashtrolls insisting on the same thing.

We trusted our judgment instead of that of Mr. 125%. Admittedly, to have done so looks like a small risk now, but many successful risks look in hindsight like they weren't risks at all. A lot of crashtrolls now wish they had bought in 2006 or 1996, on the basis that it was risk free. At the time, however, they didn't because they were all convinced it was far too dangerous. As prices rose, first they went into denial that it was even happening, then there was despair, and finally they became angry, and looked for someone to blame other than the mug in the mirror.

We have also thought long-term, where Mr. 125% has only ever thought short-term. You don't wait 15 years to buy something you intend to hold for 10. You don't wait and hope that at some point over those 15 years the nominal buying price will get cheaper. You look at the complete 10-year picture, and you buy when you think it looks cash-flow positive. This can mean either that it lets for more than the cost of ownership over that time, or that buying it is cheaper than renting it over that time.

What you do not do is speculatively short it, on the assumption that it's all going to crash - an assumption you make because the alternative is to concede that your judgment of these matters is poor beyond all belief.

Generali

Risks generally resolve to 1 or 0 given enough time.

westernpromise

Generali wrote: »

If interest rates rise, for more recent entrants to the London market, rents aren't going to be close to covering the mortgage.

Unless any such rise in interest rates pushes down house prices. The last couple of times UK house prices went down, rents went sharply up, and it's not hard to see why.

westernpromise

chucknorris wrote: »

The variable mortgage rate currently has a high margin on the base rate, and I would anticipate that when the base rate starts to climb, the variable mortgage rate will be stubborn to follow suit.

I'd go further and say actual mortgage rates could actually fall when base rates go up. We have seen mortgage rates falling steadily in the last few years, even with base rates unchanged. This I suspect is because MMR has made it harder for people to borrow the sums banks want to lend. To entice them into doing so money is being discounted, particularly secured money.

When I was paying 15.75% on my mortgage in 1990 the base rate was 15%. If lenders could subsist on 0.75% of an 80s-size mortgage they can certainly survive on 0.5% of a 2016 mortgage.

Another point to bear in mind is that in 1990, very few people were on mortgage fixes, and IIRC even introductory rates were pretty uncommon. The idea of remortgaging at all was a relatively new one. All of this made high interest an effective weapon in choking off inflation, although brutally unfair on recent market entrants. Today that wouldn't be true. If you put up interest rates to 5% tomorrow, only about a quarter or a third of mortgages would also go up, IIRC. Something else is needed to choke off demand because it's no use trying to take inflationary pressure out of the economy via a weapon which only pressurises a (nowadays) very small fraction of the populace.

michaels

chucknorris wrote: »

The variable mortgage rate currently has a high margin on the base rate, and I would anticipate that when the base rate starts to climb, the variable mortgage rate will be stubborn to follow suit. If the base rate gets to about 4%, I would anticipate variable mortgage rates to be about 5.5% (so a margin of about 1.5%), currently they are about 4.1% (so a margin of about 3.6%), although I didn't spend that long looking at them, and I did ignore deals with introductory periodical discounts. so rightly or wrongly I am not anticipating much of a drag on house prices below a base rate of 3%. I might well be wrong, but I have to base my decisions on some criteria, because as you rightly say, the danger of rising rates affecting the housing market needs to be considered.

I don't by this, I think this is just a manifestation of the mortgage industry following the 'new customers only' model that is now so prevalent in the pricing of almost everything. IE there will be no attempt to have competitive 'svr', those looking for such a product will choose a lifetime tracker, everyone else will start on a 'teaser' rate, the savvy will remortgage regularly, the lazy and those hit by a change in circumstances will end up on the cash cow svr.