Are we expecting BOE to remain at 4.75% on 8th February 2025?

horsewithnoname

ian1246 said:

I think the biggest issue for renters is scraping a deposit together. Anything which encourages landlords to sell shrinks the rental market. If the demand for rentals then doesn't also shrink at the same/ faster rate... it will result in rental prices climbing. Unfortunately I suspect a very large share of those renting lack the means to purchase the resulting increased supply of homes for sale... which means they may actually become even more lilely to be trapped if rental prices spike...

Also mortgage companies who reckon you can’t afford a mortgage which is significantly less than your rent is per month even when you have a deposit 🤷🏻‍♂️

MobileSaver

lojo1000 said:

MobileSaver said:

lojo1000 said:

MobileSaver said:

lojo1000 said:

MobileSaver said:

lojo1000 said:

RelievedSheff said:

ReadySteadyPop said:

BarelySentientAI said:

ReadySteadyPop said:

Hoenir said:

MeteredOut said:

ReadySteadyPop said:

Hoenir said:

ReadySteadyPop said:

Hoenir said:

MattMattMattUK said:

Another straw man. It should fall below 4% because to not do so will damage the economy, government and personal finance, it should not be set at a level that benefits only savers. 

All that QE on the BOE balance sheet that was pumped into the banking system primarily to underpin mortgage lending by the banks. Has yet to be transferred onto savers balance sheets. The market will determine the correct level of rates for both savers and borrowers. There's at least a decade of unwinding to go yet. 

Worth remembering that 30 year mortgage rates in the US are currently above 7%. Borrowers in the UK have so far got off lightly. 

And there is a LOT of potential volatility for credit markets.

The nature of fixed term debt is that the unwinding is spread out. There's no cliff edge to speak of.  Adjustment will become seamless. Yes there'll be headline grabbing stories. Be some surprises.  In the main it'll be a quiet and slow process. Even now companies are deleveraging. Sell assets or raise capital through equity issuance. Homeowners will be no different. All making individual decisions based on their own personal financial circumatances. 

https://www.property118.com/rising-interest-rates-hammer-btl-returns-by-45/

I think the opposite, I think the signs of stress are showing very quickly, CRE is another very good example.

What percentage of mortgages are BTL? Hardly indicative of the market.

Last figures I recall.  7% of mortgages but 20% of total outstanding borrowing.  Leverage being the underlying issue. Residential mortgages being overwhemingly on a repayment basis while BTL are interest only. BTL mortgages tend to come with higher product fees and are at higher rates than residential. 

So defaults/losses on BTL could affect bank lending on residential?

So could the price of Jarlsberg cheese or the colour of the board members' shirts.

None of these are the same thing.

Very unlikely that the things you mention would have any effect, but losses to the bank on one balance sheet would make them more cautious overall I think , remember they are also reeling from CRE losses. The main losers of course in a BTL meltdown would be recent landlords who thought they were super-investors.

No the main losers would be the tenants.

Because they would have to move?

 you don't have to be a financial whizz to realise that rental prices would increase resulting in all tenants becoming losers...

if not in the rental market they become available to buy and (somewhere in the chain) increase the stock of houses to buy for those who were previously renting

So the net effect is less rental housing stock and less renters so no net impact.

I'm no "financial whizz" so let me know where i've gone wrong.

Clearly. All other things being equal, your "no net impact" on renters is only valid if every single one of those BTL properties is subsequently utilised by someone who was previously renting which is extremely unlikely to be the case.

house then becomes vacant........which is then occupied by a renter or another owner-occupier

Again, let me know where i've gone wrong as i'm still learning.

The fundamental flaw is your supposition that every new occupant of the ex-BTL was previously either a renter or was an owner-occupier who has now released their previous home back on to the market. There are numerous situations where this is not the case.

For example, according to Crashy, loads of struggling younger people have moved back in with their parents - they are neither owner-occupiers or renters but either they or their parents are ready to snap up any ex-BTL bargains if prices drop.

Similarly, more people than ever are living on their own, often due to divorce/separation. A case in point is a relative of my girlfriend's; she married less than a year ago, it didn't go well so last month she moved out and into a rental while soon-to-be ex-hubby is still living in the marital home.

Another example, I own several properties, only my own home is occupied by an owner-occupier; the others are occupied by neither owner-occupiers or (past or present) renters...

Of course the even bigger fly in the ointment is that the UK isn't building enough homes to keep up with the growing population so if relatively fewer homes are available to renters due to a "BLT meltdown" then that can only result in even higher costs for renters.

You're just listing existing latent demand, none of the demand for housing you list is caused by the release of BTL properties on to the market. Similarly, the 'lack of housing' is an already existing factor, not an event caused by a "BTL meltdown".

The "BTL meltdown" has no impact on housing stock nor housing demand and just as houses are free to move from the rental to owner-occupier sector, so is the demand for housing.

The impact of a hypothetical BTL meltdown is that you end up with fewer rental properties and more non-rental properties. As you acknowledge there's already latent demand for property so again all other things being equal that can only result in even higher costs for renters...

As others have also said, the only way your argument would be valid was if every renter had an equal choice of either renting or buying and that clearly isn't the case.

lojo1000

MobileSaver said:

lojo1000 said:

MobileSaver said:

lojo1000 said:

MobileSaver said:

lojo1000 said:

MobileSaver said:

lojo1000 said:

RelievedSheff said:

ReadySteadyPop said:

BarelySentientAI said:

ReadySteadyPop said:

Hoenir said:

MeteredOut said:

ReadySteadyPop said:

Hoenir said:

ReadySteadyPop said:

Hoenir said:

MattMattMattUK said:

Another straw man. It should fall below 4% because to not do so will damage the economy, government and personal finance, it should not be set at a level that benefits only savers. 

All that QE on the BOE balance sheet that was pumped into the banking system primarily to underpin mortgage lending by the banks. Has yet to be transferred onto savers balance sheets. The market will determine the correct level of rates for both savers and borrowers. There's at least a decade of unwinding to go yet. 

Worth remembering that 30 year mortgage rates in the US are currently above 7%. Borrowers in the UK have so far got off lightly. 

And there is a LOT of potential volatility for credit markets.

The nature of fixed term debt is that the unwinding is spread out. There's no cliff edge to speak of.  Adjustment will become seamless. Yes there'll be headline grabbing stories. Be some surprises.  In the main it'll be a quiet and slow process. Even now companies are deleveraging. Sell assets or raise capital through equity issuance. Homeowners will be no different. All making individual decisions based on their own personal financial circumatances. 

https://www.property118.com/rising-interest-rates-hammer-btl-returns-by-45/

I think the opposite, I think the signs of stress are showing very quickly, CRE is another very good example.

What percentage of mortgages are BTL? Hardly indicative of the market.

Last figures I recall.  7% of mortgages but 20% of total outstanding borrowing.  Leverage being the underlying issue. Residential mortgages being overwhemingly on a repayment basis while BTL are interest only. BTL mortgages tend to come with higher product fees and are at higher rates than residential. 

So defaults/losses on BTL could affect bank lending on residential?

So could the price of Jarlsberg cheese or the colour of the board members' shirts.

None of these are the same thing.

Very unlikely that the things you mention would have any effect, but losses to the bank on one balance sheet would make them more cautious overall I think , remember they are also reeling from CRE losses. The main losers of course in a BTL meltdown would be recent landlords who thought they were super-investors.

No the main losers would be the tenants.

Because they would have to move?

 you don't have to be a financial whizz to realise that rental prices would increase resulting in all tenants becoming losers...

if not in the rental market they become available to buy and (somewhere in the chain) increase the stock of houses to buy for those who were previously renting

So the net effect is less rental housing stock and less renters so no net impact.

I'm no "financial whizz" so let me know where i've gone wrong.

Clearly. All other things being equal, your "no net impact" on renters is only valid if every single one of those BTL properties is subsequently utilised by someone who was previously renting which is extremely unlikely to be the case.

house then becomes vacant........which is then occupied by a renter or another owner-occupier

Again, let me know where i've gone wrong as i'm still learning.

The fundamental flaw is your supposition that every new occupant of the ex-BTL was previously either a renter or was an owner-occupier who has now released their previous home back on to the market. There are numerous situations where this is not the case.

For example, according to Crashy, loads of struggling younger people have moved back in with their parents - they are neither owner-occupiers or renters but either they or their parents are ready to snap up any ex-BTL bargains if prices drop.

Similarly, more people than ever are living on their own, often due to divorce/separation. A case in point is a relative of my girlfriend's; she married less than a year ago, it didn't go well so last month she moved out and into a rental while soon-to-be ex-hubby is still living in the marital home.

Another example, I own several properties, only my own home is occupied by an owner-occupier; the others are occupied by neither owner-occupiers or (past or present) renters...

Of course the even bigger fly in the ointment is that the UK isn't building enough homes to keep up with the growing population so if relatively fewer homes are available to renters due to a "BLT meltdown" then that can only result in even higher costs for renters.

You're just listing existing latent demand, none of the demand for housing you list is caused by the release of BTL properties on to the market. Similarly, the 'lack of housing' is an already existing factor, not an event caused by a "BTL meltdown".

The "BTL meltdown" has no impact on housing stock nor housing demand and just as houses are free to move from the rental to owner-occupier sector, so is the demand for housing.

The impact of a hypothetical BTL meltdown is that you end up with fewer rental properties and more non-rental properties. As you acknowledge there's already latent demand for property so again all other things being equal that can only result in even higher costs for renters...

As others have also said, the only way your argument would be valid was if every renter had an equal choice of either renting or buying and that clearly isn't the case.

This is full of assumptions since there are so many variables........

1. A BTL seller does not sell to someone who is currently renting....
2. Latent demand (someone currently sharing a house else there is no change in available housing when they move house) has the financial capital to buy the house ahead of the renter despite the fact the renter is exhibiting more financial capital by paying market rents
3. The BTL meltdown does not cause a drop in house prices which means more of those currently renting can afford to buy and not rent
4. Renters don't have the capital saved for a deposit as opposed to thinking prices/mortgages are simply overpriced
5. Increasing rents, if that happens, does not attract more landlords into the sector bringing more properties into use negating any rise
6. Falling house prices from the meltdown does not cause a cut in interest rates and lowers BTL costs allowing some BTL landlords to stay in business by lowering rents.
etc, etc.

This is all ifs, buts and maybes on a BTL meltdown that I don't even see occurring.

ReadySteadyPop

MobileSaver said:

lojo1000 said:

MobileSaver said:

lojo1000 said:

MobileSaver said:

lojo1000 said:

RelievedSheff said:

ReadySteadyPop said:

BarelySentientAI said:

ReadySteadyPop said:

Hoenir said:

MeteredOut said:

ReadySteadyPop said:

Hoenir said:

ReadySteadyPop said:

Hoenir said:

MattMattMattUK said:

Another straw man. It should fall below 4% because to not do so will damage the economy, government and personal finance, it should not be set at a level that benefits only savers. 

All that QE on the BOE balance sheet that was pumped into the banking system primarily to underpin mortgage lending by the banks. Has yet to be transferred onto savers balance sheets. The market will determine the correct level of rates for both savers and borrowers. There's at least a decade of unwinding to go yet. 

Worth remembering that 30 year mortgage rates in the US are currently above 7%. Borrowers in the UK have so far got off lightly. 

And there is a LOT of potential volatility for credit markets.

The nature of fixed term debt is that the unwinding is spread out. There's no cliff edge to speak of.  Adjustment will become seamless. Yes there'll be headline grabbing stories. Be some surprises.  In the main it'll be a quiet and slow process. Even now companies are deleveraging. Sell assets or raise capital through equity issuance. Homeowners will be no different. All making individual decisions based on their own personal financial circumatances. 

https://www.property118.com/rising-interest-rates-hammer-btl-returns-by-45/

I think the opposite, I think the signs of stress are showing very quickly, CRE is another very good example.

What percentage of mortgages are BTL? Hardly indicative of the market.

Last figures I recall.  7% of mortgages but 20% of total outstanding borrowing.  Leverage being the underlying issue. Residential mortgages being overwhemingly on a repayment basis while BTL are interest only. BTL mortgages tend to come with higher product fees and are at higher rates than residential. 

So defaults/losses on BTL could affect bank lending on residential?

So could the price of Jarlsberg cheese or the colour of the board members' shirts.

None of these are the same thing.

Very unlikely that the things you mention would have any effect, but losses to the bank on one balance sheet would make them more cautious overall I think , remember they are also reeling from CRE losses. The main losers of course in a BTL meltdown would be recent landlords who thought they were super-investors.

No the main losers would be the tenants.

Because they would have to move?

 you don't have to be a financial whizz to realise that rental prices would increase resulting in all tenants becoming losers...

if not in the rental market they become available to buy and (somewhere in the chain) increase the stock of houses to buy for those who were previously renting

So the net effect is less rental housing stock and less renters so no net impact.

I'm no "financial whizz" so let me know where i've gone wrong.

Clearly. All other things being equal, your "no net impact" on renters is only valid if every single one of those BTL properties is subsequently utilised by someone who was previously renting which is extremely unlikely to be the case.

house then becomes vacant........which is then occupied by a renter or another owner-occupier

Again, let me know where i've gone wrong as i'm still learning.

The fundamental flaw is your supposition that every new occupant of the ex-BTL was previously either a renter or was an owner-occupier who has now released their previous home back on to the market. There are numerous situations where this is not the case.

For example, according to Crashy, loads of struggling younger people have moved back in with their parents - they are neither owner-occupiers or renters but either they or their parents are ready to snap up any ex-BTL bargains if prices drop.

Similarly, more people than ever are living on their own, often due to divorce/separation. A case in point is a relative of my girlfriend's; she married less than a year ago, it didn't go well so last month she moved out and into a rental while soon-to-be ex-hubby is still living in the marital home.

Another example, I own several properties, only my own home is occupied by an owner-occupier; the others are occupied by neither owner-occupiers or (past or present) renters...

Of course the even bigger fly in the ointment is that the UK isn't building enough homes to keep up with the growing population so if relatively fewer homes are available to renters due to a "BLT meltdown" then that can only result in even higher costs for renters.

The problem here is that you seem to just assume that the landlord can put the house up for sale and someone will "snap it up", in reality many won`t sell without a very large discount (remember it is probably more recent landlords who paid peak prices who are seeing their returns drop by 45% according to the article) many will be forced to drop the rent to attract tenants while paying the debt they owe from savings or employment. Study visa applications are supposedly down by 40%, those are exactly the types of people that BTL landlords need to stay afloat. Tough times ahead for landlords I suspect.

ReadySteadyPop

To get back on topic I think a hold at 5.25% is the likely outcome in August.

MobileSaver

lojo1000 said:

MobileSaver said:

lojo1000 said:

MobileSaver said:

lojo1000 said:

MobileSaver said:

lojo1000 said:

MobileSaver said:

lojo1000 said:

RelievedSheff said:

ReadySteadyPop said:

BarelySentientAI said:

ReadySteadyPop said:

Hoenir said:

MeteredOut said:

ReadySteadyPop said:

Hoenir said:

ReadySteadyPop said:

Hoenir said:

MattMattMattUK said:

Another straw man. It should fall below 4% because to not do so will damage the economy, government and personal finance, it should not be set at a level that benefits only savers. 

All that QE on the BOE balance sheet that was pumped into the banking system primarily to underpin mortgage lending by the banks. Has yet to be transferred onto savers balance sheets. The market will determine the correct level of rates for both savers and borrowers. There's at least a decade of unwinding to go yet. 

Worth remembering that 30 year mortgage rates in the US are currently above 7%. Borrowers in the UK have so far got off lightly. 

And there is a LOT of potential volatility for credit markets.

The nature of fixed term debt is that the unwinding is spread out. There's no cliff edge to speak of.  Adjustment will become seamless. Yes there'll be headline grabbing stories. Be some surprises.  In the main it'll be a quiet and slow process. Even now companies are deleveraging. Sell assets or raise capital through equity issuance. Homeowners will be no different. All making individual decisions based on their own personal financial circumatances. 

https://www.property118.com/rising-interest-rates-hammer-btl-returns-by-45/

I think the opposite, I think the signs of stress are showing very quickly, CRE is another very good example.

What percentage of mortgages are BTL? Hardly indicative of the market.

Last figures I recall.  7% of mortgages but 20% of total outstanding borrowing.  Leverage being the underlying issue. Residential mortgages being overwhemingly on a repayment basis while BTL are interest only. BTL mortgages tend to come with higher product fees and are at higher rates than residential. 

So defaults/losses on BTL could affect bank lending on residential?

So could the price of Jarlsberg cheese or the colour of the board members' shirts.

None of these are the same thing.

Very unlikely that the things you mention would have any effect, but losses to the bank on one balance sheet would make them more cautious overall I think , remember they are also reeling from CRE losses. The main losers of course in a BTL meltdown would be recent landlords who thought they were super-investors.

No the main losers would be the tenants.

Because they would have to move?

 you don't have to be a financial whizz to realise that rental prices would increase resulting in all tenants becoming losers...

if not in the rental market they become available to buy and (somewhere in the chain) increase the stock of houses to buy for those who were previously renting

So the net effect is less rental housing stock and less renters so no net impact.

I'm no "financial whizz" so let me know where i've gone wrong.

Clearly. All other things being equal, your "no net impact" on renters is only valid if every single one of those BTL properties is subsequently utilised by someone who was previously renting which is extremely unlikely to be the case.

house then becomes vacant........which is then occupied by a renter or another owner-occupier

Again, let me know where i've gone wrong as i'm still learning.

The fundamental flaw is your supposition that every new occupant of the ex-BTL was previously either a renter or was an owner-occupier who has now released their previous home back on to the market. There are numerous situations where this is not the case.

For example, according to Crashy, loads of struggling younger people have moved back in with their parents - they are neither owner-occupiers or renters but either they or their parents are ready to snap up any ex-BTL bargains if prices drop.

Similarly, more people than ever are living on their own, often due to divorce/separation. A case in point is a relative of my girlfriend's; she married less than a year ago, it didn't go well so last month she moved out and into a rental while soon-to-be ex-hubby is still living in the marital home.

Another example, I own several properties, only my own home is occupied by an owner-occupier; the others are occupied by neither owner-occupiers or (past or present) renters...

Of course the even bigger fly in the ointment is that the UK isn't building enough homes to keep up with the growing population so if relatively fewer homes are available to renters due to a "BLT meltdown" then that can only result in even higher costs for renters.

You're just listing existing latent demand, none of the demand for housing you list is caused by the release of BTL properties on to the market. Similarly, the 'lack of housing' is an already existing factor, not an event caused by a "BTL meltdown".

The "BTL meltdown" has no impact on housing stock nor housing demand and just as houses are free to move from the rental to owner-occupier sector, so is the demand for housing.

The impact of a hypothetical BTL meltdown is that you end up with fewer rental properties and more non-rental properties. As you acknowledge there's already latent demand for property so again all other things being equal that can only result in even higher costs for renters...

As others have also said, the only way your argument would be valid was if every renter had an equal choice of either renting or buying and that clearly isn't the case.

This is full of assumptions since there are so many variables........

1. A BTL seller does not sell to someone who is currently renting....
2. Latent demand (someone currently sharing a house else there is no change in available housing when they move house) has the financial capital to buy the house ahead of the renter despite the fact the renter is exhibiting more financial capital by paying market rents
3. The BTL meltdown does not cause a drop in house prices which means more of those currently renting can afford to buy and not rent
4. Renters don't have the capital saved for a deposit as opposed to thinking prices/mortgages are simply overpriced
5. Increasing rents, if that happens, does not attract more landlords into the sector bringing more properties into use negating any rise
6. Falling house prices from the meltdown does not cause a cut in interest rates and lowers BTL costs allowing some BTL landlords to stay in business by lowering rents.
etc, etc.

This is all ifs, buts and maybes on a BTL meltdown that I don't even see occurring.

Of course, it's all hypothetical and I agree that Crashy's dream of a BTL meltdown is unlikely to happen.

The point being that if it did happen then unless every single BTL was acquired by a renter then it's renters who will ultimately bear the cost. Regardless of all other variables it's an absolute certainty that back in the real world that wouldn't happen and hence the main losers will be renters.

As with most HPC fantasies, they don't think it through properly and the outcome rarely pans out as they hope.

MobileSaver

ReadySteadyPop said:

MobileSaver said:

lojo1000 said:

MobileSaver said:

lojo1000 said:

MobileSaver said:

lojo1000 said:

RelievedSheff said:

ReadySteadyPop said:

BarelySentientAI said:

ReadySteadyPop said:

Hoenir said:

MeteredOut said:

ReadySteadyPop said:

Hoenir said:

ReadySteadyPop said:

Hoenir said:

MattMattMattUK said:

Another straw man. It should fall below 4% because to not do so will damage the economy, government and personal finance, it should not be set at a level that benefits only savers. 

All that QE on the BOE balance sheet that was pumped into the banking system primarily to underpin mortgage lending by the banks. Has yet to be transferred onto savers balance sheets. The market will determine the correct level of rates for both savers and borrowers. There's at least a decade of unwinding to go yet. 

Worth remembering that 30 year mortgage rates in the US are currently above 7%. Borrowers in the UK have so far got off lightly. 

And there is a LOT of potential volatility for credit markets.

The nature of fixed term debt is that the unwinding is spread out. There's no cliff edge to speak of.  Adjustment will become seamless. Yes there'll be headline grabbing stories. Be some surprises.  In the main it'll be a quiet and slow process. Even now companies are deleveraging. Sell assets or raise capital through equity issuance. Homeowners will be no different. All making individual decisions based on their own personal financial circumatances. 

https://www.property118.com/rising-interest-rates-hammer-btl-returns-by-45/

I think the opposite, I think the signs of stress are showing very quickly, CRE is another very good example.

What percentage of mortgages are BTL? Hardly indicative of the market.

Last figures I recall.  7% of mortgages but 20% of total outstanding borrowing.  Leverage being the underlying issue. Residential mortgages being overwhemingly on a repayment basis while BTL are interest only. BTL mortgages tend to come with higher product fees and are at higher rates than residential. 

So defaults/losses on BTL could affect bank lending on residential?

So could the price of Jarlsberg cheese or the colour of the board members' shirts.

None of these are the same thing.

Very unlikely that the things you mention would have any effect, but losses to the bank on one balance sheet would make them more cautious overall I think , remember they are also reeling from CRE losses. The main losers of course in a BTL meltdown would be recent landlords who thought they were super-investors.

No the main losers would be the tenants.

Because they would have to move?

 you don't have to be a financial whizz to realise that rental prices would increase resulting in all tenants becoming losers...

if not in the rental market they become available to buy and (somewhere in the chain) increase the stock of houses to buy for those who were previously renting

So the net effect is less rental housing stock and less renters so no net impact.

I'm no "financial whizz" so let me know where i've gone wrong.

Clearly. All other things being equal, your "no net impact" on renters is only valid if every single one of those BTL properties is subsequently utilised by someone who was previously renting which is extremely unlikely to be the case.

house then becomes vacant........which is then occupied by a renter or another owner-occupier

Again, let me know where i've gone wrong as i'm still learning.

The fundamental flaw is your supposition that every new occupant of the ex-BTL was previously either a renter or was an owner-occupier who has now released their previous home back on to the market. There are numerous situations where this is not the case.

For example, according to Crashy, loads of struggling younger people have moved back in with their parents - they are neither owner-occupiers or renters but either they or their parents are ready to snap up any ex-BTL bargains if prices drop.

Similarly, more people than ever are living on their own, often due to divorce/separation. A case in point is a relative of my girlfriend's; she married less than a year ago, it didn't go well so last month she moved out and into a rental while soon-to-be ex-hubby is still living in the marital home.

Another example, I own several properties, only my own home is occupied by an owner-occupier; the others are occupied by neither owner-occupiers or (past or present) renters...

Of course the even bigger fly in the ointment is that the UK isn't building enough homes to keep up with the growing population so if relatively fewer homes are available to renters due to a "BLT meltdown" then that can only result in even higher costs for renters.

The problem here is that you seem to just assume that the landlord can put the house up for sale and someone will "snap it up",

If someone doesn't snap it up and the property languishes on the market for too long then the first thing any decent EA will advise is to get rid of the existing tenants and then re-market with vacant possession...

Can you remind me again how that benefits renters?

ReadySteadyPop

MobileSaver said:

ReadySteadyPop said:

MobileSaver said:

lojo1000 said:

MobileSaver said:

lojo1000 said:

MobileSaver said:

lojo1000 said:

RelievedSheff said:

ReadySteadyPop said:

BarelySentientAI said:

ReadySteadyPop said:

Hoenir said:

MeteredOut said:

ReadySteadyPop said:

Hoenir said:

ReadySteadyPop said:

Hoenir said:

MattMattMattUK said:

Another straw man. It should fall below 4% because to not do so will damage the economy, government and personal finance, it should not be set at a level that benefits only savers. 

All that QE on the BOE balance sheet that was pumped into the banking system primarily to underpin mortgage lending by the banks. Has yet to be transferred onto savers balance sheets. The market will determine the correct level of rates for both savers and borrowers. There's at least a decade of unwinding to go yet. 

Worth remembering that 30 year mortgage rates in the US are currently above 7%. Borrowers in the UK have so far got off lightly. 

And there is a LOT of potential volatility for credit markets.

The nature of fixed term debt is that the unwinding is spread out. There's no cliff edge to speak of.  Adjustment will become seamless. Yes there'll be headline grabbing stories. Be some surprises.  In the main it'll be a quiet and slow process. Even now companies are deleveraging. Sell assets or raise capital through equity issuance. Homeowners will be no different. All making individual decisions based on their own personal financial circumatances. 

https://www.property118.com/rising-interest-rates-hammer-btl-returns-by-45/

I think the opposite, I think the signs of stress are showing very quickly, CRE is another very good example.

What percentage of mortgages are BTL? Hardly indicative of the market.

Last figures I recall.  7% of mortgages but 20% of total outstanding borrowing.  Leverage being the underlying issue. Residential mortgages being overwhemingly on a repayment basis while BTL are interest only. BTL mortgages tend to come with higher product fees and are at higher rates than residential. 

So defaults/losses on BTL could affect bank lending on residential?

So could the price of Jarlsberg cheese or the colour of the board members' shirts.

None of these are the same thing.

Very unlikely that the things you mention would have any effect, but losses to the bank on one balance sheet would make them more cautious overall I think , remember they are also reeling from CRE losses. The main losers of course in a BTL meltdown would be recent landlords who thought they were super-investors.

No the main losers would be the tenants.

Because they would have to move?

 you don't have to be a financial whizz to realise that rental prices would increase resulting in all tenants becoming losers...

if not in the rental market they become available to buy and (somewhere in the chain) increase the stock of houses to buy for those who were previously renting

So the net effect is less rental housing stock and less renters so no net impact.

I'm no "financial whizz" so let me know where i've gone wrong.

Clearly. All other things being equal, your "no net impact" on renters is only valid if every single one of those BTL properties is subsequently utilised by someone who was previously renting which is extremely unlikely to be the case.

house then becomes vacant........which is then occupied by a renter or another owner-occupier

Again, let me know where i've gone wrong as i'm still learning.

The fundamental flaw is your supposition that every new occupant of the ex-BTL was previously either a renter or was an owner-occupier who has now released their previous home back on to the market. There are numerous situations where this is not the case.

For example, according to Crashy, loads of struggling younger people have moved back in with their parents - they are neither owner-occupiers or renters but either they or their parents are ready to snap up any ex-BTL bargains if prices drop.

Similarly, more people than ever are living on their own, often due to divorce/separation. A case in point is a relative of my girlfriend's; she married less than a year ago, it didn't go well so last month she moved out and into a rental while soon-to-be ex-hubby is still living in the marital home.

Another example, I own several properties, only my own home is occupied by an owner-occupier; the others are occupied by neither owner-occupiers or (past or present) renters...

Of course the even bigger fly in the ointment is that the UK isn't building enough homes to keep up with the growing population so if relatively fewer homes are available to renters due to a "BLT meltdown" then that can only result in even higher costs for renters.

The problem here is that you seem to just assume that the landlord can put the house up for sale and someone will "snap it up",

If someone doesn't snap it up and the property languishes on the market for too long then the first thing any decent EA will advise is to get rid of the existing tenants and then re-market with vacant possession...

Can you remind me again how that benefits renters?

While picking up the tab for all the mortgage debt..until it sells.........many landlords will be wary of this and will try to keep tenants, but I meant that it is unlikely to be snapped up with or without tenants because the landlords in trouble likely did their borrowing at peak prices.

Hoenir

lojo1000 said:

MobileSaver said:

lojo1000 said:

RelievedSheff said:

ReadySteadyPop said:

BarelySentientAI said:

ReadySteadyPop said:

Hoenir said:

MeteredOut said:

ReadySteadyPop said:

Hoenir said:

ReadySteadyPop said:

Hoenir said:

MattMattMattUK said:

Another straw man. It should fall below 4% because to not do so will damage the economy, government and personal finance, it should not be set at a level that benefits only savers. 

All that QE on the BOE balance sheet that was pumped into the banking system primarily to underpin mortgage lending by the banks. Has yet to be transferred onto savers balance sheets. The market will determine the correct level of rates for both savers and borrowers. There's at least a decade of unwinding to go yet. 

Worth remembering that 30 year mortgage rates in the US are currently above 7%. Borrowers in the UK have so far got off lightly. 

And there is a LOT of potential volatility for credit markets.

The nature of fixed term debt is that the unwinding is spread out. There's no cliff edge to speak of.  Adjustment will become seamless. Yes there'll be headline grabbing stories. Be some surprises.  In the main it'll be a quiet and slow process. Even now companies are deleveraging. Sell assets or raise capital through equity issuance. Homeowners will be no different. All making individual decisions based on their own personal financial circumatances. 

https://www.property118.com/rising-interest-rates-hammer-btl-returns-by-45/

I think the opposite, I think the signs of stress are showing very quickly, CRE is another very good example.

What percentage of mortgages are BTL? Hardly indicative of the market.

Last figures I recall.  7% of mortgages but 20% of total outstanding borrowing.  Leverage being the underlying issue. Residential mortgages being overwhemingly on a repayment basis while BTL are interest only. BTL mortgages tend to come with higher product fees and are at higher rates than residential. 

So defaults/losses on BTL could affect bank lending on residential?

So could the price of Jarlsberg cheese or the colour of the board members' shirts.

None of these are the same thing.

Very unlikely that the things you mention would have any effect, but losses to the bank on one balance sheet would make them more cautious overall I think , remember they are also reeling from CRE losses. The main losers of course in a BTL meltdown would be recent landlords who thought they were super-investors.

No the main losers would be the tenants.

Because they would have to move?

 you don't have to be a financial whizz to realise that rental prices would increase resulting in all tenants becoming losers...

I presume the logic here is the BTL houses are taken out of the rental housing stock and there are therefore less houses to rent which raises rents?

But I wonder what then happens to those houses........if not in the rental market they become available to buy and (somewhere in the chain) increase the stock of houses to buy for those who were previously renting and have a downward impact on the cost of house prices.

So the net effect is less rental housing stock and less renters so no net impact.

I'm no "financial whizz" so let me know where i've gone wrong.

A lot of rental stock is now in the form of holiday lets and AirBNB.  Freeing this up will provide more permanent homes in which people can live. 

Hoenir

horsewithnoname said:

ian1246 said:

I think the biggest issue for renters is scraping a deposit together. Anything which encourages landlords to sell shrinks the rental market. If the demand for rentals then doesn't also shrink at the same/ faster rate... it will result in rental prices climbing. Unfortunately I suspect a very large share of those renting lack the means to purchase the resulting increased supply of homes for sale... which means they may actually become even more lilely to be trapped if rental prices spike...

Also mortgage companies who reckon you can’t afford a mortgage which is significantly less than your rent is per month even when you have a deposit 🤷🏻‍♂️

Owning a house comes with an additional cost burden. Direct comparison between mortgage and rent outgoing is financially misleading.