The Next Nail in the Coffin

Generali

cells wrote: »

overall i simply dont see landlords posing more of a risk of making a hpc worse than owner occupiers especially with some simple cashflow risk managment. and like you say there is evidence to suggest that landlords help prices recover faster post crash which should reduce the risk for all

So why do you imagine that the Bank of England does? They're a pretty smart bunch down there. They were clever enough not to give me a job when I applied!

ruggedtoast

This is the world's smallest violin playing for buy to let landlords:

.

westernpromise

ruggedtoast wrote: »

This is the world's smallest violin playing for buy to let landlords:

.

I have one that's even smaller: it's the one playing for sell-to-rent speculators who called it exactly wrong.

cells

Generali wrote: »

So why do you imagine that the Bank of England does?

I'm not sure that they do think its a greater risk.
A few articles from some members of the BOE suggest things along the lines of 'dont worry we know its about risk management not about risk elimination' and 'we will probably make things easier for the challenger banks not harder'

And like most authoritarian institutions they want power as much as they can get but that does not mean they will or can just ban industries out of existence

They're a pretty smart bunch down there. They were clever enough not to give me a job when I applied!

the powers that be dont always get it right, just look at the mess that was 2007-2010 or the over reaction to the crash and over regulation of mortgages some of which they are trying to back tack on (eg no mortgages for the over 65)


personally I think if they think the BTL industry is going to panic sell in a slump they need to first prove that is what happened in 2008-2011. The UK is quite a big place and they should not find it hard to look at places with lots of BTL like inner London and places will not so much BTL and see what prices did during and after the crash. When Ive done that I did not see any worse falls or impacts of high BTL areas which suggest they dont panic sell. The only other possibility is forced sales due to cashflow. Banning BTL mortgages or over regulating them to try and get rid of a cashflow problem is like cracking a nut with a pile driver. If cashflow is a risk then put into place cashflow management. Specifically banks could ask borrowers to show that they have 1 or 2 year of mortgage payments as savings. That will allow 2-5 years of cashflow risk management


I dont think the BOE is going to do anything radical. At worst I think they may limit BTL to 75% max and put a pay rate of 5.5% at 125% cover but that is pretty much the industry standard anyway probably accounting for more than 98% of business meeting or exceeding that criteria.

Filo25

tkane wrote: »

Outer London Zones 3-5 is red hot. Will go up 20% or so over the next 3 years, at least.

We are just about to complete on something in Zone 4, even over the course of the 6 months we were looking there it was very noticeable that prices were increasing.

Amazing how little there is on the market to be honest, what little there is that hangs around for a while is the usual mammothly overpriced stuff.

It'll be interesting to see how some of the headwinds facing the market in general affect it going forwards.

padington

They're taking air out of the market to ensure the economy enjoys more HPI. Those that can hold on to their properties will probably still do well until 2020 maybe 2025.

Buying using different family names will most probably be the next step in this saga.

Generali

cells wrote: »

I dont think the BOE is going to do anything radical. At worst I think they may limit BTL to 75% max and put a pay rate of 5.5% at 125% cover but that is pretty much the industry standard anyway probably accounting for more than 98% of business meeting or exceeding that criteria.

Good guess

I'll do the sums later but for a typical BTLer in London, higher rate taxpayer, bank having to take account of the new taxes on BTL. That's going to have a material impact I would imagine.

In the discussion paper Thrugulmir links to from the BoE

http://www.bankofengland.co.uk/pra/Documents/publications/cp/2016/cp1116.pdf

they estimate a fall in new BTL approvals of 10-20% by Q3 2018. The BoE also hints pretty strongly in the paper that either banks or borrowers or both have been misrepresenting BTL mortgages as SME loans and is stage whisper for them to stop it.

The risk concern appears to be not so much what lenders have been doing but what their future business plans suggest for how they are planning to behave. This is exactly why the BoE was given back responsibility for this sort of regulation as it is closer to market participants and so can act up front.

Once upon a time a quiet word would have done these days it's all papers and lawyers.

mwpt

cells wrote: »

personally I think if they think the BTL industry is going to panic sell in a slump they need to first prove that is what happened in 2008-2011. The UK is quite a big place and they should not find it hard to look at places with lots of BTL like inner London and places will not so much BTL and see what prices did during and after the crash. When Ive done that I did not see any worse falls or impacts of high BTL areas which suggest they dont panic sell. The only other possibility is forced sales due to cashflow. Banning BTL mortgages or over regulating them to try and get rid of a cashflow problem is like cracking a nut with a pile driver. If cashflow is a risk then put into place cashflow management. Specifically banks could ask borrowers to show that they have 1 or 2 year of mortgage payments as savings. That will allow 2-5 years of cashflow risk management

No, that'll never work. Many BTL speculators already (if reading the btl forums on property118 and propertytribes is anything to go by) find any way they can to expand their portfolios. It'll be pretty easy to rig that sort of requirement.

Also, I doubt the concern is so much about a slump causing panic selling because clearly they don't do this if they're not forced. You can't use 2008 as an example of lack of panic selling though because interest rates were slashed and debtors (including over extended BTLers) bailed out. My guess what they are really concerned about is a market event forcing interest rates up resulting in forced sales from BTL. Or worse, they could end up totally underwater, can't cover mortgage interest, can't exit in profit and the banks taking the loss. It would not surprise me to find that MEWing on existing properties to expand the portfolio has resulting in some quite fanciful evaluations to extract the capital.

I really don't want even more of my tax money going to bail out more banks and property hoarders and I'm guessing the government doesn't have much appetite for this either.

Imposing controls on BTL, in my humble opinion is a combination of a political move, a small tax grab and preempting actual systemic risk that could exist in the future.

cells

Generali wrote: »

Good guess

I'll do the sums later but for a typical BTLer in London, higher rate taxpayer, bank having to take account of the new taxes on BTL. That's going to have a material impact I would imagine.

In the discussion paper Thrugulmir links to from the BoE

http://www.bankofengland.co.uk/pra/Documents/publications/cp/2016/cp1116.pdf

they estimate a fall in new BTL approvals of 10-20% by Q3 2018. The BoE also hints pretty strongly in the paper that either banks or borrowers or both have been misrepresenting BTL mortgages as SME loans and is stage whisper for them to stop it.

The risk concern appears to be not so much what lenders have been doing but what their future business plans suggest for how they are planning to behave. This is exactly why the BoE was given back responsibility for this sort of regulation as it is closer to market participants and so can act up front.

Once upon a time a quiet word would have done these days it's all papers and lawyers.

the power of confirmation bias, we both read the same document and my reading of it was quite different to yours

steady as she goes

BTL to still expand

but possibly 10-20% less than it otherwise would have (some of, possibly most of that due to the tax changes not the BOE intervention)

a few firms applied for SME capital discounts, not to the spirit of the discount, stop doing it, we think the impact of them not doing it is "not material"

generally dont decrease standards and try to stick to the 5.5% rental cover and take into account service charges in flats.



the biggest upset could be asking the lenders to treat landlords with 4 or more properties differently. some lenders may thing that so little of their business is to 4 property plus landlords that its not worth doing business with them any more. that could mean less choice and higher rates for such landlords

michaels

Interestingly it seems that even with all the 'tightening' and restrictions the BOE still see the direction of travel in the next 5 years as being from OO to BTL rather than the other way.

Not at all the BTL sell off with cheap homes for OO that some posters on here have been speculating about (wishing for)....