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Could this be the ruin of BTL ?
Comments
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But they were homeowners not investors with commercial small print in their mortgage arrangements.
The big lenders are not going to want to be seen as turfing any families out onto the streets be they tenants or home-owners.
My BTL mortgage came with a big booklet entitled "terms and conditions for mortgages on residential properties." So exactly the same as the T&Cs for owner occupiers. It is just the product that is different, not the T&Cs.
It is really not in the lenders' interest to have a crash, so they are not going to fuel it by demanding re-valuations when the mortgage account is being managed properly.I'm a Forum Ambassador on the housing, mortgages & student money saving boards. I volunteer to help get your forum questions answered and keep the forum running smoothly. Forum Ambassadors are not moderators and don't read every post. If you spot an illegal or inappropriate post then please report it to forumteam@moneysavingexpert.com (it's not part of my role to deal with this). Any views are mine and not the official line of MoneySavingExpert.com.0 -
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.
As a banker I can say that it's not a case of being prepared to take on risk, it's what risks are you allowed to take on.
I never realised that BTLers could face margin calls (I've asked more than once across different websites and been told they can't).
In a falling market, marginal borrowers will be in a horrible place. Mortgage doesn't cover the rent, need to come up with a few grand to continue holding the loss making property. Then again the margin call will push mortgage costs closer to rent paid.
What to do, what to do......0 -
ramborai1987 wrote: »
Il y a beaucoup de monde au balcon0 -
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And sometimes on home turf, you don't get on the podium...
Just one of them Cantona momemts.0 -
In a falling market, marginal borrowers will be in a horrible place. Mortgage doesn't cover the rent, need to come up with a few grand to continue holding the loss making property. Then again the margin call will push mortgage costs closer to rent paid.
What to do, what to do......
The rent will still cover the mortgage unless:
1) IRs rise.
2) Rents fall.
House prices will have NO EFFECT.
I think silvercar is right on this one (he usually is).
GGThere are 10 types of people in this world. Those who understand binary and those that don't.0 -
Where's that "Slapped" button I keep asking for?Gorgeous_George wrote: ».....I think silvercar is right on this one (he usually is).
GGA house isn't a home without a cat.
Those are my principles. If you don't like them, I have others.
I have writer's block - I can't begin to tell you about it.
You told me again you preferred handsome men but for me you would make an exception.
It's a recession when your neighbour loses his job; it's a depression when you lose yours.0 -
BTL loans aren't like mortgages for OO purchasers... they are effectively business loans. In the 80s/early 90s thousands of businesses went to the wall because of margin calls.
BTL loans, especially IO ones, are a new, stupid idea, and will in the years to come, be seen as a barmy non-investment.
The housing market runs in 18 year boom-bust cycles, which means anyone trying BTL in the upper part of the cycle will lose eveything as the cycle enters the bottom part and the margin calls come in.
BTL loans have simply been a way of getting people to buy the properties off of the "smart money" people who were getting out of the market. If BTL was such a good idea, banks would be buying all the properties themselves.Bankruptcy isn't the worst that can happen to you. The worst that can happen is your forced to live the rest of your life in abject poverty trying to repay the debts.0 -
BTL loans aren't like mortgages for OO purchasers... they are effectively business loans. In the 80s/early 90s thousands of businesses went to the wall because of margin calls.
BTL loans, especially IO ones, are a new, stupid idea, and will in the years to come, be seen as a barmy non-investment.
The housing market runs in 18 year boom-bust cycles, which means anyone trying BTL in the upper part of the cycle will lose eveything as the cycle enters the bottom part and the margin calls come in.
BTL loans have simply been a way of getting people to buy the properties off of the "smart money" people who were getting out of the market. If BTL was such a good idea, banks would be buying all the properties themselves.
Just wondering SquatNow are you living in a SQUAT with no heating, mattress on the floor, sleeping with your shoes under the pillow ( in case someone nicks them ) or are you sitting on the balcony sipping a martini from your penthouse apartment overlooking the river.0 -
Gorgeous_George wrote: »The rent will still cover the mortgage unless:
1) IRs rise.
2) Rents fall.
House prices will have NO EFFECT.
I think silvercar is right on this one (he usually is).
GG
House prices have an effect on the RISK attached to the loan.
If the landlord has plenty of equity in the property then the lender's money is safe.
If there is little or no equity then the lender's money is at risk should house prices fall.
If there is negative equity then the lender is looking at a loss.
Basically the lender wants to know their money is safe by there being enough in the pot such that if the house was sold they can get their money back. Clearly the house price is crucial to this equation.
Therefore there is every chance they will want to maintain their margin. I think they will ask for a top up of cash to preserve this. I also think that they would force a sale if they think the market will drop further as they will prefer to take a small loss early rather than a large loss late.
They will not take responsibility for the fact that tenants are put out on the street. Tenant's have little security of tenure anyway. The anger would be directed towards the government and maybe cause letting law to be revised.
But more important is kennyboy66's point in post #11: "Much more likely is the effect of more stringent conditions when one deal expires & the BTL tries to re-mortgage. I can see this causing some 'forced selling'."
If the landlord cannot re-mortgage then he will be stuck on his current lender's standard variable rate which is typically 2% above base rate. Then the landlord runs a very real risk of the rent not being enough and falling into arrears.
As everyone knows banks lend you an umbrella when it's sunny and take it away when it rains.0
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