How does Buy to Let END!

[sancho panza]

3 hours ago, JoeDavola said:

 

I don't get how you can infer with that how many of these have been cash, repayment mortgage, and IO mortgage?

using Nationwide as an exmaple where the data is avaailable,91% of their £42bn BTL loan book is IO.

run that through the sector and you won't be far out.The maths,particualrly psot s24 only really works on IO if leveraged.

 

[JoeDavola]

14 minutes ago, sancho panza said:

using Nationwide as an exmaple where the data is avaailable,91% of their £42bn BTL loan book is IO.

run that through the sector and you won't be far out.The maths,particualrly psot s24 only really works on IO if leveraged.

That's incredible, I had no idea.

So if prices did drop a bit there could be people who have IO BTL-ed for a few years and end up seeing basically nothing from it.

Obviously if you bought 10 years ago somewhere like NI where prices were much cheaper 10 years ago your probably fine.

[sancho panza]

1 hour ago, JoeDavola said:

That's incredible, I had no idea.

So if prices did drop a bit there could be people who have IO BTL-ed for a few years and end up seeing basically nothing from it.

Obviously if you bought 10 years ago somewhere like NI where prices were much cheaper 10 years ago your probably fine.

I thinkits not widely realsied how on the edge the banking sytsme is. @spygirl been covering the issues with FRB since ToS,he knows.

Lot of BTL have bascially rolled the equity into bigger loans/more hosues/been using the profit to subsisdeise lietsyle rather than pay down debt.

we're in the wash otu bit of the cycle os well find out but there are a lot of looming marginal sellers out there and they're all liekly to be hitting the market at the same time.hence the equtiy might not be as large as peiple think.

reality is that if you want to transact now as per @Chewing Grass psot in a thread you need to be ready tot ake 10%to 15% off ,maybe more if you want a quick sale

[spygirl]

12 hours ago, JoeDavola said:

That's incredible, I had no idea.

So if prices did drop a bit there could be people who have IO BTL-ed for a few years and end up seeing basically nothing from it.

Obviously if you bought 10 years ago somewhere like NI where prices were much cheaper 10 years ago your probably fine.

 

10 hours ago, sancho panza said:

I thinkits not widely realsied how on the edge the banking sytsme is. @spygirl been covering the issues with FRB since ToS,he knows.

Lot of BTL have bascially rolled the equity into bigger loans/more hosues/been using the profit to subsisdeise lietsyle rather than pay down debt.

we're in the wash otu bit of the cycle os well find out but there are a lot of looming marginal sellers out there and they're all liekly to be hitting the market at the same time.hence the equtiy might not be as large as peiple think.

reality is that if you want to transact now as per @Chewing Grass psot in a thread you need to be ready tot ake 10%to 15% off ,maybe more if you want a quick sale

IO - both resi n BTL - exposure is massive.

IO mortgage drove the creditr boom from 2000 to MMR (2014ish).

Larger banks can take the hit, sp fro resi IO. Adn they will be takign the hit shortly.

However smaller Banks BS, whove jumped into riskier lending esp IO BTL are fucked.

Cov BS

Nationwide.

Skipton.

 

 

 

[sancho panza]

1 hour ago, spygirl said:

 

IO - both resi n BTL - exposure is massive.

IO mortgage drove the creditr boom from 2000 to MMR (2014ish).

Larger banks can take the hit, sp fro resi IO. Adn they will be takign the hit shortly.

However smaller Banks BS, whove jumped into riskier lending esp IO BTL are fucked.

Cov BS

Nationwide.

Skipton.

 

 

 

I think its really telling when you look at the analysis in the banking thread where we go through the annual reports,how the smaller BS's obfuscate(polite word) over the issues by basically not revelaing the size of their IO book ,their regional exposure,year of loan origin or grading their loan book using stage 1//2/3.

As the housing market drops 10%+ a lot of laons are going to need reassessing in terms of LTV and it could get very messy out there if the banks use the margin call clauses to demand more capital and/or raise the IR

Some of these could linger on for years or they could go pop next month.

AS I've said,the family friend of ours with 25 BTL's,IO,100%LTV thats going bust is all legacy laons from pre 2007...............

[JoeDavola]

The incredible bit to me is that there's some number of properties out there that were bought in the '06 boom and presumably are still in negative equity that have been kept on 'life support' for 15 years with cheap IO loans.

I do know of one owner occupier who is still in negative equity from '06 and has apparently been on an IO repayment since - even doing an expensive garage renovation to a summer house type thing, and just wacking that onto the mortgage.

Even with the money he's spent the house is worth less in ££ than it was in 06 when he bought it.

There are people in my parents street whose houses are still worth less in ££ than 06 when they bought them.

[spygirl]

1 hour ago, JoeDavola said:

The incredible bit to me is that there's some number of properties out there that were bought in the '06 boom and presumably are still in negative equity that have been kept on 'life support' for 15 years with cheap IO loans.

I do know of one owner occupier who is still in negative equity from '06 and has apparently been on an IO repayment since - even doing an expensive garage renovation to a summer house type thing, and just wacking that onto the mortgage.

Even with the money he's spent the house is worth less in ££ than it was in 06 when he bought it.

There are people in my parents street whose houses are still worth less in ££ than 06 when they bought them.

Address:	18 Bouch Street, Shildon, DL4 2JW
Type:	Terrace
Tenure:	Freehold
New build:	No
Links:	Price map  (Shildon)
Transaction type:	Standard price paid transaction

Registered sales:

Date Sold	Price Paid	Nominal change	Real change
20 Mar 2023	£55,000	-15.4%	-54.3%
28 Jun 2006	£65,000	38.3%	32.7%
08 Mar 2005	£47,000	327.3%	267.2%
26 Feb 1999	£11,000	n/a	n/a

[spygirl]

Id bet money that Mar 05 buy was a potfolio builder.

Who may or may not splashed some paint, then flipped it and prob several more as an off eh shelf BTL portolfio to some idiot.

Lucky escape on price  only 10k down.

Ive a lot with 30k - 40k off.

And thats not takign into account the cost and hassle of running a NE BTL for ~15 years.

 

 

 

[spygirl]

1 hour ago, JoeDavola said:

The incredible bit to me is that there's some number of properties out there that were bought in the '06 boom and presumably are still in negative equity that have been kept on 'life support' for 15 years with cheap IO loans.

I do know of one owner occupier who is still in negative equity from '06 and has apparently been on an IO repayment since - even doing an expensive garage renovation to a summer house type thing, and just wacking that onto the mortgage.

Even with the money he's spent the house is worth less in ££ than it was in 06 when he bought it.

There are people in my parents street whose houses are still worth less in ££ than 06 when they bought them.

Id add that your house price is set by the most heacvily indebted neighbour.

If youve are on HTB estate, whre laods of Deanos have piled in 2015-2022, then suddenly find themselves not able to afford and get repo'd for 40% off then thats the market price as far as a bank bvlaue s concerned.

The with IO is massive.

Witha repayment, the bak as ~20 * 12 credit events - each moneth the mortgage is paid, chipping away at the debt owned.

With the average 20% deposit, 10y of a 25y mortgage will see the debt shrink to under 50% of house value -a ssuming a not too brutal fall.

With an IO theres a single credit event - right at the end. Thast when you find out if the banks fucked up on lending.

 

 

[sancho panza]

3 hours ago, JoeDavola said:

The incredible bit to me is that there's some number of properties out there that were bought in the '06 boom and presumably are still in negative equity that have been kept on 'life support' for 15 years with cheap IO loans.

I do know of one owner occupier who is still in negative equity from '06 and has apparently been on an IO repayment since - even doing an expensive garage renovation to a summer house type thing, and just wacking that onto the mortgage.

Even with the money he's spent the house is worth less in ££ than it was in 06 when he bought it.

There are people in my parents street whose houses are still worth less in ££ than 06 when they bought them.

As spy says below,it only takes one credit event in the course of an IO mrotgage and you're up poop creek sans paddle.

What has amazed me when I went trhrough Nwides mrotgage book was the scale of the IO.I jsut assumed that some of these LL's had a basci grasp of maths. As soon as S24 came in then the margins got slashed and they had 5 years to get out before that hammered them.The IR rises are jsut extra pain on top of what was already a dire finacnial position for the IO BTLers

Also of interest was the seize and scale of legacy issues.AS banking thead shows,the bulk of stage2/3 loans on NatWests book are pre 2013 iirc.So basically they're marking more recent laons at par but there's signidicant recency bias in that as some of these laons have been preiced to perfection and don't include things like getting ill,losing jobs,govt spedning getting reined in from current mamtoh levels etc.

lot to go wrong in these IO laons and it's only since going throuhg the books recently That I realsied the scale of it-like I said 91% IO loans...

1 hour ago, spygirl said:

Address:	18 Bouch Street, Shildon, DL4 2JW
Type:	Terrace
Tenure:	Freehold
New build:	No
Links:	Price map  (Shildon)
Transaction type:	Standard price paid transaction

Registered sales:

Date Sold	Price Paid	Nominal change	Real change
20 Mar 2023	£55,000	-15.4%	-54.3%
28 Jun 2006	£65,000	38.3%	32.7%
08 Mar 2005	£47,000	327.3%	267.2%
26 Feb 1999	£11,000	n/a	n/a

jsut plugged in some bust postcodes into HP io and you start seeing some crazy things in Londnium,check these out

tehy aren't the bulk of trasnactions -theyre still positve but the direction has changed.

Edited July 10, 2023 by sancho panza

[Rare Bear]

On 10/07/2023 at 11:33, JoeDavola said:

The incredible bit to me is that there's some number of properties out there that were bought in the '06 boom and presumably are still in negative equity that have been kept on 'life support' for 15 years with cheap IO loans.

I do know of one owner occupier who is still in negative equity from '06 and has apparently been on an IO repayment since - even doing an expensive garage renovation to a summer house type thing, and just wacking that onto the mortgage.

Even with the money he's spent the house is worth less in ££ than it was in 06 when he bought it.

There are people in my parents street whose houses are still worth less in ££ than 06 when they bought them.

What's an IO repayment?

[JoeDavola]

5 hours ago, Rare Bear said:

What's an IO repayment?

It's me using the wrong words - should have just said IO mortgage.

[Heart's Ease]

Buy-to-let landlords face extra £275 on monthly mortgage bills

A buy-to-let firesale could push down house prices as high interest rates hammer landlords’ profit margins, the Bank of England has warned.

 

Economics reporter Melissa Lawford has the latest:

 

Buy-to-let landlords will see an average increase of £275 in their monthly mortgage bills by the end of 2025 as their fixed rate deals expire and they refinance at much higher rates.

 

Over the course of the year, this means they will be paying an extra £3,300 per year.

 

“Falling profitability could, in principle, cause landlords to sell their property investments and exit the buy-to-let market. If this were to happen in large enough volumes, it could put downward pressure on house prices,” the Bank of England warned.

 

If landlords were to fully absorb a £275 monthly increase in the mortgage bills, without raising rents, the share of buy-to-let mortgages with interest coverage ratios below 125pc would plummet from 3pc to 40pc by the end of 2025.

 

This means that the rent would be less than 125pc of the landlord’s interest bill. After tax and maintenance costs, these properties would potentially be loss-making.

 

Landlord profits are already under pressure from a range of other factors such as changes to tax relief on buy-to-let mortgages, capital gains tax rules, increased regulation, and plans to introduce requirements for energy efficiency upgrades, the Bank warned.

 

Tenants will come under heavy strain and could be pushed to borrow to cover their costs as investors try to pass on the burden of higher rates, the Bank warned. “Higher costs relative to incomes may lead to an increased reliance on consumer credit, or difficulties paying off existing consumer credit or other types of debt,” the Bank said.

 

From telegraph biznizz blog feed today.

[Wight Flight]

19 minutes ago, Heart's Ease said:

This means that the rent would be less than 125pc of the landlord’s interest bill. After tax and maintenance costs, these properties would potentially be loss-making.

I can see a move to cap the amount of tax to the profit they actually make. Basically 100% tax for a lot of them.

If they had fought for that, rather than a total reversal of S24, they might have had a better chance of winning.

[JoeDavola]

45 minutes ago, Heart's Ease said:

Tenants will come under heavy strain and could be pushed to borrow to cover their costs as investors try to pass on the burden of higher rates

Or they might move back with their folks. Or house share with someone.

They assume that every tennant can just be milked for more and more and will just take it. Some, perhaps many, will not.

[Mouse]

20 minutes ago, JoeDavola said:

Or they might move back with their folks. Or house share with someone

Our daughter has already asked if she can move back home if her rent is increased. She works full time but it's already at the maximum she can afford.

[JoeDavola]

15 minutes ago, Mouse said:

Our daughter has already asked if she can move back home if her rent is increased. She works full time but it's already at the maximum she can afford.

And any decent parent would be happy to do this.

I think often wealthy families are better at keeping their kids wealth out of landlords pockets than folk from working class backgrounds. I mentioned a while back the top boss of my company has several adult kids in their 20's' and none of them have ever left home, at least two of them are working full time in good graduate jobs and have for some time.

Now part of the problem is the market being unaffordable in terms of buying, but I imagine he is very much of the opinion that none of his families wealth is going into the hands of a landlord, vs my own situation where my Dad's drinking and whatever personality disorder he has made the last few years living at home hell. My brother moved back for a few years to save a deposit and found the same, it drove him to the edge too.

Having said that I don't regret moving out at all and was lucky to get a cheap setup all these years.

EDIT: I was paying £250 housekeeping to my folks in 2007 which I see would be £400 now. Current rent in the flat is £570 and bills are negligable.

Edited July 12, 2023 by JoeDavola

[Mouse]

14 minutes ago, JoeDavola said:

And any decent parent would be happy to do this.

Yes, we are redecorating the spare room "just in case" 😄

I know how you feel I left home as soon as I could, couldn't bear living with my "mother".

[Boglet]

54 minutes ago, JoeDavola said:

And any decent parent would be happy to do this.

I think often wealthy families are better at keeping their kids wealth out of landlords pockets than folk from working class backgrounds. I mentioned a while back the top boss of my company has several adult kids in their 20's' and none of them have ever left home, at least two of them are working full time in good graduate jobs and have for some time.

Now part of the problem is the market being unaffordable in terms of buying, but I imagine he is very much of the opinion that none of his families wealth is going into the hands of a landlord, vs my own situation where my Dad's drinking and whatever personality disorder he has made the last few years living at home hell. My brother moved back for a few years to save a deposit and found the same, it drove him to the edge too.

Having said that I don't regret moving out at all and was lucky to get a cheap setup all these years.

EDIT: I was paying £250 housekeeping to my folks in 2007 which I see would be £400 now. Current rent in the flat is £570 and bills are negligable.

Indeed wealthy parents are more likely to have the space to provide this kind of assistance.

I know a few people/couples whose parents have an annex or similar that they live in and both groups can live pretty autonomously, not on top of each other. MASSIVE financial boost.

[JoeDavola]

4 hours ago, Boglet said:

Indeed wealthy parents are more likely to have the space to provide this kind of assistance.

I know a few people/couples whose parents have an annex or similar that they live in and both groups can live pretty autonomously, not on top of each other. MASSIVE financial boost.

I think there's also the idea of thinking of your children's wealth as an extension of your own wealth i.e. the family's wealth, and thus not thinking of them as some kind of leech if they are still in your house and not putting money into the pocket of a landlord for living in the same city.

My folks often insult a bloke in his 30's who lives with his folks next door to them. He has a live in girlfriend too. The house is well big enough for his parents and he and his girlfriend. So whats the problem exactly, why is he a failure for living like this?

When my parents tried to sell their house, most of the interest was from Indian and Chinese folk, who saw it as mult-generational house, they were going to move 2 or 3 generations into it. That''s not seen as shameful, and you can therefore see how those cultures are going to start accumulting wealth faster than whitey and the "when you're 18 you're out the door" attitude.

Edited July 12, 2023 by JoeDavola

[spygirl]

One thing thats not been considered with the vast increase in PRS is ....

*lots* of foot loose n fancy free renters.

In ye olde times if a town/area/zone hit some trouble - large employer shuts, etc etc, then the people living in that area would bunker down, cut spending,  and try and work thru the down cycle.

That wont happen now esp. with so many renters.

Big lay off in London - maybe the BBC ... - renters are going to leave. 1 month notice. vamoosh.

Attempt to put rents up? Renters will jack the job, causing vast problems for local employees or forcing a similar wage demand.

Trying to apply waht happened in previous slowdowns to todays just wont work.

The dyanamics are very much different, less understood.

 

Edited July 12, 2023 by spygirl

[Ash4781b]

9 hours ago, Heart's Ease said:

Buy-to-let landlords face extra £275 on monthly mortgage bills

A buy-to-let firesale could push down house prices as high interest rates hammer landlords’ profit margins, the Bank of England has warned.

 

Economics reporter Melissa Lawford has the latest:

 

Buy-to-let landlords will see an average increase of £275 in their monthly mortgage bills by the end of 2025 as their fixed rate deals expire and they refinance at much higher rates.

 

Over the course of the year, this means they will be paying an extra £3,300 per year.

 

“Falling profitability could, in principle, cause landlords to sell their property investments and exit the buy-to-let market. If this were to happen in large enough volumes, it could put downward pressure on house prices,” the Bank of England warned.

 

If landlords were to fully absorb a £275 monthly increase in the mortgage bills, without raising rents, the share of buy-to-let mortgages with interest coverage ratios below 125pc would plummet from 3pc to 40pc by the end of 2025.

 

This means that the rent would be less than 125pc of the landlord’s interest bill. After tax and maintenance costs, these properties would potentially be loss-making.

 

Landlord profits are already under pressure from a range of other factors such as changes to tax relief on buy-to-let mortgages, capital gains tax rules, increased regulation, and plans to introduce requirements for energy efficiency upgrades, the Bank warned.

 

Tenants will come under heavy strain and could be pushed to borrow to cover their costs as investors try to pass on the burden of higher rates, the Bank warned. “Higher costs relative to incomes may lead to an increased reliance on consumer credit, or difficulties paying off existing consumer credit or other types of debt,” the Bank said.

 

From telegraph biznizz blog feed today.

 

Blimey. Those stats at 125% interest cover are bad. 

[Wight Flight]

51 minutes ago, Ash4781b said:

 

Blimey. Those stats at 125% interest cover are bad. 

They are a lot worse for higher rate tax payers.

[Ash4781b]

33 minutes ago, Wight Flight said:

They are a lot worse for higher rate tax payers.

Yeah I was thinking that. Surely the assumption is that if one is in BTL one is a higher rate tax payer. 

[Wight Flight]

6 minutes ago, Ash4781b said:

Yeah I was thinking that. Surely the assumption is that if one is in BTL one is a higher rate tax payer. 

You would like to think so.