Could this be the ruin of BTL ?

m00m00

IveSeenTheLight wrote: »

Nice to assume.
My BTL's are capital and interest so there are BTL's out there on similar repayment option.
Therefore my maths does add up.
Even without capital repayment, depending on when the property was bought, previous valuation increases may cover any price correction.
Look at the hypothetical figures I used again without capital repayments:rolleyes:

And AGAIN you extrapolate your unique individual situation to form a universal whole.

the clear empirical evidence is that MOST BTL mortgages on the market are IO

tr3mor

m00m00 wrote: »

the clear empirical evidence is that MOST BTL mortgages on the market are IO

From a year processing mortgages at Birmingham Midshires in 03/04 this is correct.

BrandNewDay

macaque wrote: »

History shows that lenders tend to be ruthless about this. In past recessions, lenders would foreclose at the drop of a hat. I suspect BTLs with multiple loans could be in the most danger as lenders will compete with each other to get their money out first.

Could you link to something that illustrates this? That would be really interesting to know more about.

I think you could be right about the multiple property owners...

Also, maybe the idea is to force a foreclosure sooner than later in a falling market?

macaque_2

BrandNewDay wrote: »

Could you link to something that illustrates this? That would be really interesting to know more about.

I think you could be right about the multiple property owners...

Also, maybe the idea is to force a foreclosure sooner than later in a falling market?

I can't give you a link but the problem was widely reported in earlier recessions. Banks would call in small business debts at the drop of a hat. The banks were heavily criticised for this this.

Where people have large BTL loans, regular revaluations in a falling market would unavoidable. It is inconcievable to think that a lender would sit back and cross their fingers.

Gorgeous_George

The problem is that a bank may have 100,000 of its BTL mortgages at an average of 80%LTV. At an average of £100K per loan that would be £12.5bn of security against borrowings of £10bn. Their risk assessment looks fine as any reposessions are likely to be unusual and their lending is recoverable be selling the repossessed homes.

Now, what if prices fall by 40%. Those 100,000 mortgages that represented £10bn of loans are now 'secured' against property with a value of only £7.5bn! A shortfall of 33% and even the sale of (now more likely) repossessed properties would not cover their liabilities.

Thanks to carpetbagging, more lenders now have shareholders who will demand that something is done (proactively) to minimise their exposure to risk.

Right, now i'll read the link.

GG

SquatNow

Many lenders/banks will have no choice but to act... most of the loans will have been sold on but under the terms of that sale the bank will for contractually required to monitor the LTV ratio and ensure it remains high enough. If the bank doesn't want to get that extra money from the BTLer then it will have to make up the difference from it's own pocket and hope/pray that the BTLer doesn't default.

Few banks will be prepared to take on this sort of risk in the current climate.

mystic_trev

Overall, taking account of both prime and sub-prime deals, the total number of buy-to-let and residential mortgage products available has fallen a staggering 40% in just the last three months. While most of this change can be attributed to the sub-prime market, seeing a 72% reduction in the buy-to-let market and a 54% cut in residential deals, the 16% fall in prime residential products is worth noting

http://www.citywire.co.uk/News/NewsArticle.aspx?VersionID=97670&re=1921&ea=5946

hearts

As long as you keep servicing the loan they aint gonna come for their money simple as.

IveSeenTheLight

m00m00 wrote: »

And AGAIN you extrapolate your unique individual situation to form a universal whole.

the clear empirical evidence is that MOST BTL mortgages on the market are IO

Did you bother reading the whole post?
It also included the following: -

Even without capital repayment, depending on when the property was bought, previous valuation increases may cover any price correction.
Look at the hypothetical figures I used again without capital repayments:rolleyes:

Guy_Montag

Fine for you, but what about the c. 300k btlers who "invested" last year?