New BTL Mortgage Underwriting Standards

Conrad

Millions of ordinary buyers face ever tougher criteria and are excluded from the mortgage market, even when prices were considerably lower 2 years ago, and we've had MMR further tightening of retail lending since.


So these folk are pretty much resigned to renting in the absence of a big change in circumstances.


Now they will find renting becomes harder as B2L lending constraints and other interventions take effect.


Hamish claims all we need do is build more. Utter bilge, the more we build the more migrants will come. We are simply over-populated in much of England, and there is no way out of this without a hugely reduce immigration number and even then we'll face many demand -push issues.


Imagine demand with another 20 years mass immigration (and note the numbers are well under reported). Great for my B2L portfolio, hideous for many struggling people.

Conrad

mwpt wrote: »

Well, on this forum we have the following views.

* Trying to shift the balance from landlords to OOs will result in decreased rental stock and therefore more demand for the remaining stock and higher rents.

* A crash results in a shift from OO to renters, meaning more demand for rental stock and higher rents.

The positions are at odds with each other but people nod sagely at both views. Meanwhile, rents rise broadly in line with historical averages, as they always do. Some areas become popular and rents rise faster, some areas stagnate and rents stagnate too.

The point missing here is that even 2 or 3 years ago when prices were much less in many places, millions could not get a mortgage, ergo if we get a price fall, it will make next to no difference to the numbers able to buy thanks to onerous regulation.


Interventions to reduce B2L supply will only compound the issue for this mass of people than will now see rental supply constrained as more migrants pour in (often subsidised by HB unavailable to people like my divorced Brother on modest income, really struggling to pay rent and his ex's mortgage) and rents will surely rise. Just as you wont invest your money if the risk / return balance is skewed, then nor will LL's.


In the meantime the super wealthy can set-up property funds to buy UK property and leave it standing empty.

wotsthat

mwpt wrote: »

Well, on this forum we have the following views.

* Trying to shift the balance from landlords to OOs will result in decreased rental stock and therefore more demand for the remaining stock and higher rents.

* A crash results in a shift from OO to renters, meaning more demand for rental stock and higher rents.

The positions are at odds with each other but people nod sagely at both views. Meanwhile, rents rise broadly in line with historical averages, as they always do. Some areas become popular and rents rise faster, some areas stagnate and rents stagnate too.

It'll be interesting to see what happens.

In the absence of other factors I think it's a near certainty that OO ratio will increase, rents increase and landlords (and owners) will increase their wealth gap on renters.

As for a crash who knows? I'm ready and waiting but life plans aren't being made reliant on that outcome - be nice icing on the cake if it happened 2022 ish.

cells

Conrad wrote: »

The point missing here is that even 2 or 3 years ago when prices were much less in many places, millions could not get a mortgage, ergo if we get a price fall, it will make next to no difference to the numbers able to buy thanks to onerous regulation.

Exactly, if you have £15k and want to buy a £100k house and the banks say no then it wont matter if house prices fall 10% you still cant buy.

If house prices fall another 10% you still cant buy and the unemployment numbers jumped a million

If house prices fall another 10% you still cant buy and there are two million unemployed.


The only way for someone with £15k who want to buy a £100k house is to give him a mortgage not for prices to fall an impossible 85% so he can buy

cells

wotsthat wrote: »

OO ratio will increase

OO ration is determined by

1: Mortgage regulations and availability. Take away self cert, take away 100% LTV, take away interest only and you will find OO ratio shrinks. Introduce those products and you will find the OO ratio grows

2: House building numbers. More = more owners

3: Population growth. More = less owners

4: How the Economy is doing

5: Wages

6: Taxes

7: Price


Probably in that order. Notice how taxes and prices are a lot lower than points 1-5?

mwpt

Conrad wrote: »

The point missing here is that even 2 or 3 years ago when prices were much less in many places, millions could not get a mortgage, ergo if we get a price fall, it will make next to no difference to the numbers able to buy thanks to onerous regulation.

What onerous regulation? We have the lowest rates in history at a range of LTVs with higher lending multiples than any previous period. That is a fact. All we know about this "mortgage rationing" is that lending criteria is more strict than the ultra loose years of 200x-2007 and some anecdotes from the BTL landlords here who have a vested interest.

Unlike some other people here, I am not overly concerned with the absolute ratio of owners to renters (though I do believe our tenancy laws need updating). Not everyone deserves to buy a house in their desired location, this cannot be possible. What I am against is HPI growth spurred by ever looser and cheaper credit such that a sensible person can't just save up and wait to buy in the future because the "ladder" is continuously being pulled up away from them. This makes no sense for anyone except existing owners and only then if they are in their final dream home or plan to leave the area.

I do not believe that your desired loosening of credit to OOs is the way to fix this problem. If it does so at all, it will be only temporary because you have to chase ever higher prices with ever cheaper and ever looser credit (how can you not see that?), with the very obvious problem that you leave the market open to huge busts in a credit event like we saw in the US, Spain, Ireland, etc. Why would we want to chase this stupid idea in the UK?

Interventions to reduce B2L supply will only compound the issue for this mass of people than will now see rental supply constrained as more migrants pour in (often subsidised by HB unavailable to people like my divorced Brother on modest income, really struggling to pay rent and his ex's mortgage) and rents will surely rise. Just as you wont invest your money if the risk / return balance is skewed, then nor will LL's.

Ah yes, exhibit A, thank you. Reducing BTL sector means higher rents for tenants. I await exhibit B where we'll hear how "crash trolls will find their rents go up in a crash as more people move from OO to renters".

In the meantime the super wealthy can set-up property funds to buy UK property and leave it standing empty.

Like they do now.

cells

mwpt wrote: »

What onerous regulation? We have the lowest rates in history at a range of LTVs with higher lending multiples than any previous period. That is a fact. All we know about this "mortgage rationing" is that lending criteria is more strict than the ultra loose years of 200x-2007 and some anecdotes from the BTL landlords here who have a vested interest.

Unlike some other people here, I am not overly concerned with the absolute ratio of owners to renters (though I do believe our tenancy laws need updating). Not everyone deserves to buy a house in their desired location, this cannot be possible. What I am against is HPI growth spurred by ever looser and cheaper credit such that a sensible person can't just save up and wait to buy in the future because the "ladder" is continuously being pulled up away from them. This makes no sense for anyone except existing owners and only then if they are in their final dream home or plan to leave the area.

I do not believe that your desired loosening of credit to OOs is the way to fix this problem. If it does so at all, it will be only temporary because you have to chase ever higher prices with ever cheaper and ever looser credit (how can you not see that?), with the very obvious problem that you leave the market open to huge busts in a credit event like we saw in the US, Spain, Ireland, etc. Why would we want to chase this stupid idea in the UK?



Ah yes, exhibit A, thank you. Reducing BTL sector means higher rents for tenants. I await exhibit B where we'll hear how "crash trolls will find their rents go up in a crash as more people move from OO to renters".



Like they do now.

You look at London and think the BTL sector is driving prices and the shift to rentals and I can see why you might draw that conclusion

What about elsewhere?
Say Bradford from 2007-2014 when prices fell yet renting increased? What happened there? Should we ignore it because it Doesn't fit your theory?

And Doncaster or Middlesbrough's or much of the north and midlands which saw both falling prices and an increasong rental sector. Your theory needs to explain these else it falls down.


The alternative theory's of mortgage rationing driving the owner to renter ratio and the economy and supply/demand driving prices does explain London and does explain the north and Midlands. Your theory kind of looks workable if we look just at London and perhaps the SE but it falls down in virtually all the other regions.

What say you?

mwpt

cells wrote: »

You look at London and think the BTL sector is driving prices and the shift to rentals and I can see why you might draw that conclusion

What about elsewhere?
Say Bradford from 2007-2014 when prices fell yet renting increased? What happened there? Should we ignore it because it Doesn't fit your theory?

And Doncaster or Middlesbrough's or much of the north and midlands which saw both falling prices and an increasong rental sector. Your theory needs to explain these else it falls down.


The alternative theory's of mortgage rationing driving the owner to renter ratio and the economy and supply/demand driving prices does explain London and does explain the north and Midlands. Your theory kind of looks workable if we look just at London and perhaps the SE but it falls down in virtually all the other regions.

What say you?

I say that I cannot comment on anecdotes. If you give some data I will comment.

cells

mwpt wrote: »

I say that I cannot comment on anecdotes. If you give some data I will comment.

You know where the data is. Land registry for prices and ONS for regional OO/PR data.

What's clear is that the different regions have performed very differently in price. Even those that saw falling prices in 2007-2014/5 saw renting increase and owning fall.

So price is out of the equation in those areas as price didn't increase to 'price people out' so something else needs to explain why people stopped buying and had to rent instead. Mortgage rationing anyone?

mwpt

cells wrote: »

You know where the data is. Land registry for prices and ONS for regional OO/PR data.

What's clear is that the different regions have performed very differently in price. Even those that saw falling prices in 2007-2014/5 saw renting increase and owning fall.

So price is out of the equation in those areas as price didn't increase to 'price people out' so something else needs to explain why people stopped buying and had to rent instead. Mortgage rationing anyone?

What is mortgage rationing? A return to the lending standards before 200x-2007? If that is what you call rationing then I am all for it. If people cannot save up a 5% deposit (which would be a couple of years saving) then they don't deserve to buy a house.

And in those areas you speak about, at least people who can save up and buy can do so in the knowledge that prices aren't outrunning their ability to afford. And you think this is a bad thing.

On top of that, I question the picture you're painting of this. I know you hate the HPC website but I see plenty of threads over there complaining about high house prices in northern regions. A quick look on rightmove shows that indeed there are areas where prices are far higher than the averages you speak about.

So what's going on? This mortgage rationing must clearly be failing in these areas.