F L S Extended To Buy To Let Lenders

[Liquid Goldfish]

On C4 News just now.

That's made me a bit cross.

Even more intriguing is something I discovered and confirmed with the Bank of England. One of the extensions announced today will be the incorporation into the scheme of previously barred “specialist lenders” in the mortgage market.

This is a euphemism for specialist buy-to-let (BTL) and high loan-to-value lending units of banks, but also stand-alone companies. I presume this means that companies such as Paragon and Precise will now be in receipt of central bank subsidised funding to lend to landlords.

Support for BTL was specifically excluded from the Treasury’s Help to Buy scheme, because it was seen as controversial to use taxpayer backing to support landlord’s speculative home hoarding.

Is this not the case for the Bank of England too? It is clear that a sweep of banks have relaunched or greatly expanded their BTL offering on the back of FLS 1.0. The very cheapest (interest only) mortgages are now solely available to landlords.

My link

The Bank claims it should not be making normative judgements about where to lend into the economy, that is for commercial banks. But its subsidy for SMEs is a normative judgement (and the FT’s Chris Giles points out that today’s other extension to “unincorporated SMEs”, could see a further expansion to cottage landlord businesses).

At one level, neither the Treasury nor the Bank of England should really attempt to justify the FLS on the basis of helping “first time buyers” and small businesses, when the reality is that much of the subsidy is ending up helping augment landlords property portfolios. Or if they do, please can we have the numbers on Buy to Let?

At a bigger level, the taxpayer-backed incentive to housing financialisation and speculation, and the disincentive to save appears to be the absolute opposite of the Coalition’s much-vaunted “rebalancing”.

There was a sniff of this around “Help To Buy”. The housing market seems to be being primed for a “beautifully” timed 2014/15 credit bonanza, that will sustain house prices.

The economic opiate of a house price stimulus for a chancellor near an election seems to remain as strong as ever in a coalition committed to rebalancing.

In which case this is not economic policy on steroids. It is economic policy on smack.

Edited April 24, 2013 by oldsport

[thecrashingisles]

And even worse given that 'other lenders' were already recovering.

[Tired of Waiting]

Faisal Islam, FLS now for BTL:

" (...) Even more intriguing is something I discovered and confirmed with the Bank of England. One of the extensions announced today will be the incorporation into the scheme of previously barred “specialist lenders” in the mortgage market.

This is a euphemism for specialist buy-to-let (BTL) and high loan-to-value lending units of banks, but also stand-alone companies. I presume this means that companies such as Paragon and Precise will now be in receipt of central bank subsidised funding to lend to landlords.

Support for BTL was specifically excluded from the Treasury’s Help to Buy scheme, because it was seen as controversial to use taxpayer backing to support landlord’s speculative home hoarding.

Is this not the case for the Bank of England too? It is clear that a sweep of banks have relaunched or greatly expanded their BTL offering on the back of FLS 1.0. The very cheapest (interest only) mortgages are now solely available to landlords.

The Bank claims it should not be making normative judgements about where to lend into the economy, that is for commercial banks. But its subsidy for SMEs is a normative judgement (and the FT’s Chris Giles points out that today’s other extension to “unincorporated SMEs”, could see a further expansion to cottage landlord businesses).

At one level, neither the Treasury nor the Bank of England should really attempt to justify the FLS on the basis of helping “first time buyers” and small businesses, when the reality is that much of the subsidy is ending up helping augment landlords property portfolios. Or if they do, please can we have the numbers on Buy to Let?

At a bigger level, the taxpayer-backed incentive to housing financialisation and speculation, and the disincentive to save appears to be the absolute opposite of the Coalition’s much-vaunted “rebalancing”.

There was a sniff of this around “Help To Buy”. The housing market seems to be being primed for a “beautifully” timed 2014/15 credit bonanza, that will sustain house prices.

The economic opiate of a house price stimulus for a chancellor near an election seems to remain as strong as ever in a coalition committed to rebalancing.

In which case this is not economic policy on steroids. It is economic policy on smack.

Follow @faisalislam on Twitter.

http://blogs.channel4.com/faisal-islam-on-economics/is-souped-up-scheme-a-shot-in-the-arm-for-lending/18112

Edited April 24, 2013 by Tired of Waiting

[interestrateripoff]

The property ponzi is the UK economy.

Why bother investing in manufacturing when you can an asset that will be worth £1bn in a 100 years.

Viva recovery.

How long before BTL can borrow at 0.1% just to keep the dream alive?

[okaycuckoo]

And still no mention of reform of the Housing Act and ASTs. Nuts.

[zugzwang]

The property ponzi is the UK economy.

Why bother investing in manufacturing when you can an asset that will be worth £1bn in a 100 years.

Viva recovery.

How long before BTL can borrow at 0.1% just to keep the dream alive?

Not before 2015. Osborne would need to spend a LOT of cash to drive rates that low. As mental as he is, I can't see Carney doing more than £200bn additional QE before the General Election.

But really, is there any point in trying to earn a living at anything besides property speculation in this country?

[Tired of Waiting]

What has the government got against my daughter? They've just heaped £50,000 plus debt onto her for going to college this year charging her a rate of 3% over rpi (currently 6.6% per annum) and then lend ultra cheap loans to people who would corner the housing market and farm her when she leaves college.

I f*cking hate the government. Both/all colours. There is now no hope.

+ 1

[The Masked Tulip]

It is over isn't it. Most of us would have been better off buying a few years back. As others have commented, property IS the UK economy. EAs are going to have the boom times back soon - if not already.

There is nothing stopping EAs upping asking prices by vast sums. FYI, I spoke with an EA manager today who valued a first time buyer house at 134 and two of his competitors came in with 170 and 175. Why - because they can!?

[Bloo Loo]

With HelpToBuy IIRC you can get a £50,000 loan with ZERO interest for five years. And yes property speculation investment is being encouraged with FLS. Property speculation is the only way to increase GDP (apart from government spending) and GDP must grow at the expense of the rest of the economy.

you have to prove you can pay it back, and the rest of the loan should be at sensible criteria.

with little wage inflation, then the problem @ 5 years are going to be immense...IF anyone other than the handful of happy campers actually gets one.

[DebtFree2011]

And the whole nation worshipped the houses they lived in. The media, politicians, the Great Brainwashed ...... they came and worshipped at the Temple of UK House Prices:

When a nation does everything in its power to elevate property prices ..... it has run out of ideas

Edited April 24, 2013 by DebtFree2011

[Bloo Loo]

There will be a scheme SMIFHTB for people who get into trouble and even lower mortgage rates. Add intergenerational mortgages and the ponzi can continue longer than you can wait. And with FLS for BTL the countries return to GDP growth is assured.

logic dictates the Government loan would be the first to pay back in such a scheme...as its interest rate is likely to be the most punitive and increasing in cost annually..

So we could end up with a taxpayer bail out paying the taxpayer...

All it needs is the bank to foreclose and we have a triple whammy....the loss, the bail out, and now no recovery.

[Democorruptcy]

What has the government got against my daughter? They've just heaped £50,000 plus debt onto her for going to college this year charging her a rate of 3% over rpi (currently 6.6% per annum) and then lend ultra cheap loans to people who would corner the housing market and farm her when she leaves college.

I f*cking hate the government. Both/all colours. There is now no hope.

She is the daughter of a "pleb". THEY don't know who you are.

[TheCountOfNowhere]

its insanity. how do you stop this lunacy?

they are doing everything they can to support house prices and the banks and they are promising to do this for years to come.

this isn't what we voted for...where's the austerity...where are the cuts...where is the regulation of the banks...where is the honesty.

Edited April 24, 2013 by TheCountOfNowhere

[Bloo Loo]

But the banks will not foreclose, they will just get more guarantees and money from the taxpayer. That's the beauty of it, the whole thing will be bailed out by the taxpayer.

something will make them pucker up...

We just dont know what...or when.

[TheCountOfNowhere]

It is over isn't it. Most of us would have been better off buying a few years back. As others have commented, property IS the UK economy. EAs are going to have the boom times back soon - if not already.

id agree if it were not for the fact everyone i know will not get a pay rise anytime soon. half she people i know have lost their jobs or company. most who got new jobs had pay cuts, everyone else is in debt and living on the edge. prices are being kept up a bit by low interest rate backed monthly affordability, a monthly affordability that is being eating away at by inflation. lots of people terrified about their job too, no security.

where is the money coming from to pay for these overpriced houses?

[long time lurking]

FLS and .... 'Mortgage costs have plummeted by up to £3,000 in just six months despite rising fees.

Competition for home loans has heated up since the Government handed over £80 billion of cheap cash to encourage banks to lend at affordable rates. Banks and building societies have slashed their best deals to record lows. Borrowers with a 40 per cent deposit can now get a two-year fix for as little as 1.74 per cent ... '

Read more: http://www.dailymail.co.uk/money/mortgageshome/article-2313700/Mortgage-costs-fall-3k-months-fees-soared-1-5k.html#ixzz2RPuQJ35v

The 40% bit is the problem for FTB

And i`m selling brand new BMW m3s for 5k a pop but they are only available to people who can run 100 meters backwards in 5 seconds

And why did lending fell last quarter debt aversion ? or something along the lines of the above ?

Desperate times and desperate measures but on a country wide basis house prices are flat or falling and if you take London out of that equation I think the picture would be totally different

The question I ask myself is where is all this money going

[okaycuckoo]

It is over isn't it. Most of us would have been better off buying a few years back. As others have commented, property IS the UK economy. EAs are going to have the boom times back soon - if not already.

Absolutely not. We is Japan - different circs, similar result.

Sadly the timing causes permanent damage to a lot of people.

[The Masked Tulip]

The 40% is a problem but HelpToBuy will help fix that one and if not then there will be another scheme and then another. TPTB will keep inventing new schemes to keep property prices high. Who on earth really thinks that the solution for FTB is for the taxpayer to give out 20% interest free loans because the FTB does not have a deposit.

Prices are too high but I would not be surprised to see tax relief on mortgage interest making a come back, it is there for BTL so why not for OO. Makes perfect sense and will enable FTBs to pay more for property and get a tax subsidy. Think of any way to keep prices high and the government will do it.

+1

I think they are going to hurl one scheme after another at pushing up house prices. Denial is a terrible thing. I should know - been in it too long.

[moneyfornothing]

Wow !! and I only predicted this yesterday !!

http://www.housepricecrash.co.uk/forum/index.php?showtopic=189839&st=0&p=909310094entry909310094

Edited April 24, 2013 by moneyfornothing

[The Masked Tulip]

Paul Mason on Newsnight just said that Osborne's economic plan is "to flood the housing market with cheap lending".

[long time lurking]

The 40% is a problem but HelpToBuy will help fix that one and if not then there will be another scheme and then another. TPTB will keep inventing new schemes to keep property prices high. Who on earth really thinks that the solution for FTB is for the taxpayer to give out 20% interest free loans because the FTB does not have a deposit.

Prices are too high but I would not be surprised to see tax relief on mortgage interest making a come back, it is there for BTL so why not for OO. Makes perfect sense and will enable FTBs to pay more for property and get a tax subsidy. Think of any way to keep prices high and the government will do it.

I agree with they will do anything to keep house prices high ,but what have all the schemes they have dreamt up so far achieved,at best the market is flat skewed massively by London/south east

HTB is there to try and prevent a certain crash which would happen due to the new lending criteria due to come into force next year

It is now harder to get a high LTV mortgage than ever before yet there are multiple schemes it place that are supposed to make it easier including free money for the banks, so why are they not throwing that free money at any one with a pulse al la 2005 ? when mortgage rates were 4-5% + and far less affordable than they are now with ultra low rates

I don't know the answers to the above but as far as I can see there are two favorites 1.. there has been a massive change in settlement concerning debt as there was no shortage off takers in 05 at much higher rates or 2 the money is just being given to the banks under the pretence of increasing lending but are just using it to rebuild there balnce sheets , as they are still not making it easy to borrow at a high LTV

Edited April 24, 2013 by long time lurking

[Bruce Banner]

It is over isn't it. Most of us would have been better off buying a few years back. As others have commented, property IS the UK economy. EAs are going to have the boom times back soon - if not already.

There is nothing stopping EAs upping asking prices by vast sums. FYI, I spoke with an EA manager today who valued a first time buyer house at 134 and two of his competitors came in with 170 and 175. Why - because they can!?

+1

I think they are going to hurl one scheme after another at pushing up house prices. Denial is a terrible thing. I should know - been in it too long.

I most certainly would not be better off if I'd bought a few years back, I'd have been well over £100K worse off than I am now. That's not denial, it's a statement of fact.

Every day you post about house prices going up and suggest that it would be best to buy now, but in my part of the South East asking prices are being reduced every couple of weeks, although most vendors are not cutting fast enough and end up chasing the market down without achieving a sale.

[inflating]

Lunatics, over, have, the, asylum, taken.

[The Masked Tulip]

I most certainly would not be better off if I'd bought a few years back, I'd have been well over £100K worse off than I am now. That's not denial, it's a statement of fact.

Every day you post about house prices going up and suggest that it would be best to buy now, but in my part of the South East asking prices are being reduced every couple of weeks, although most vendors are not cutting fast enough and end up chasing the market down without achieving a sale.

Sadly, my area is not like yours.

[dances with sheeple]

Paul Mason on Newsnight just said that Osborne's economic plan is "to flood the housing market with cheap lending".

Won`t compare with the flood of global money up to 2007. There is nothing they can do to re-inflate. If sentiment really has turned all the schemes in the world will amount to nothing.