Thursday, Oct 25, 2007
Correction, its not a crash, its a correction
Telegraph.co.uk: MPC's top property expert warns of buy-to-let dangers
"The Bank of England's leading property expert has warned that problems in the buy-to-let sector could provide the trigger for a housing market correction."
Someone best change the name of the site then :p
Posted by the haunted @ 09:22 AM (1195 views) Add Comment
16 Comments
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1. japanese uncle said...
Yes, it is a correction. But what should be corrected in this instance happens to be a horrendous gap, rather than an error.
2. down wave said...
Can anyone help?
Recession: If tenants fall behind with their rent and the landlord falls behind with his mortgage
payments and the bank gives the landlord 30 days notice to pay his Business mortgage back and
he can't and goes bankrupt. (this happened in the 1990's crash)
What would happen to the tenant, would he have to pay rent to the bank, presumable the rental
contract is with the landlord not with the bank?
Could the tenant withhold his rent?
Who would be responsible for evicting the tenant; the bank or landlord?
In the event that the mortgage has been sold on as mortgage secured bonds, who would own the property deed?
If the property is owned by Chinese investors, would they move to UK and live it the property?
In the case of a depression and high unemployment, then many tenants would not be able to pay their rent, so the above outlined problems would become pandemic?
It seems to me that the current situation is ripe for a tenants rent STRIKE !
3. C'mon Correction said...
We need affordable housing again - not a generation of massively indebted people - in order to retain a stable economy. Be it by a correction/crash - whatever, the longer it goes on the worse for our long-term economy.
4. Social Justice Through Housing said...
Maybe I am being naive or have, possibly, lost the plot, but I thought in this brave new world it was about risk mitigation and moving risk from those that did not want it to those that wanted to be exposed to it and could handle it.
I have to say I did not believe it (just like I did not believe a company that did on-line palm reading could be worth £10 trillion pounds in the dot.com bubble!), or maybe I just did not understand it.
However, it now looks like we have spread the risk, and created such a tangled chain that touches so many people, countries and business, that issues/problems anywhere in the chain (issues with renters, issues with BTL mortgage holders, or issues with Chinese investors) could bring the whole house (no pun intended) down.
This is ineptitude and negligence of the highest order, and covers many of those making and overseeing our economic policies and well being.
How can this not end in tears?
5. Urine Trouble said...
Surely the DSS would pay rent for out of work tennants so they did not become homeless - BTL government bailout!!
6. David Smith's Sub Prime. . . said...
Don't tempt me down wave...
The contract is with the Landlord though, the mortgage moves with the land if the land is sold, as it is on the Charges Register of The Land Registry (or it is paid off...). If the mortgagees (Building Sopciety) take possession then they will soemtimes write off the loss on a mortgage (if the property is in negative equity) and resell, recouping the difference from any insurnace policy, or the mortgagor (taker of the charge). In the mid 1990's that I recall well as I worked in the CAB, people were just coming in and handing their keys in or just puting them through the letterbox at the bank/building society - a sobering thought as the building society were still actively chasing in 2001 and in some cases later (as late as 2005). The lmitation period for chasing was uncertain, as the mortgages are made under deed and therefore the mortgagees were claiming it was 10 years.
7. Scumbag said...
In the last crash my friend was working and renting in Bath. He came home one night to find the locks changed. Turns out his Landlord had been reposessed by the bank and this was the first he knew of it. He had to commute from Ringwood for a couple weeks until it was sorted.
8. Jonb said...
It is indeed a correction. House prices are around 10 to 12 times earnings, whereas they should be about 4 times earnings. Quite a large correction, but a correction nevertheless.
9. bidin'matime said...
Downwave - I think you will find that most leases provide for Ground 2 of Schedule 2 of the Housing Act 1988 to apply, whereby the tenants can be evicted if the landlord fails to pay the mortgage...
10. down wave said...
7. Scumbag said... Presumably your ffriend from Ringwood lost his deposit?
If things where to goes as bad as they did post 1929, then the courts would not be able to cope with all of the applications for repossession. Many people would lose their deposit as the landlord had blown it??
Now in this case, who will issue the eviction order, how long will it take, and will the courts evict thousands of tenants? How will the DSS pay the rent and to whom?
In the USA subprime, the morgage was sold on in packages of bonds owned possible by foreign speculators,, what has happened those people that can and those that can't pay their mortgage - to whom do they pay mortgage - their lender has gone bust?
I asked a set of serious questions above, but I see only answers for situation in the case of bank mortages and solvent banks. If Northern Rock had gone the same way as the US subrime banks, then how would and to whom would the tenants or the DSS pay their rent?
Do any of you know the answer?
11. down wave said...
Also, if a tenant can't or won't pay his rent and stayes put, the landlord, bank, or bondholder must apply to the courts for baliff eviction, this takes months in a good economy and cost money, how would this be if a house price meltdown was triggered by the buy to lets and high unemployment?
12. David Smith's Sub Prime. . . said...
Bidin,
Schedule 2 only applies vis a vis the Landlord and Tenant. Once the main security is lost (i.e. freehold) becasue the Landlord defaults and the Mortgagee moves into possession, there is no lease unless the Mortgage Company become landlord by an implied tenancy through the Tenant paying thme rent and they accepting.
13. paul said...
Hang on Scumbag - that situation where the locks were changed and your friend had to commute from Ringwood, that's called forced eviction and according to my understanding it's not just illegal, it's a criminal offence.
In other words, the police get involved when that happens. If the landlord changed the locks, he could well find himself under lock and key the very same night!!
14. planning4acrash said...
Landlords this from this year were not allowed to hold deposits, have to be held by a third party, so the government must have seen this coming!
15. down wave said...
Thank you, now the thinkers are thinking and posting, good. If it all goes toes up, then those affected will not be able to afford legal help. People posting on this forum will be able to advise.
Since the Northern Rock subprime crash the media have been forced to take another position other than their normal spin and lies about a bull housing market, but they recently got around that one by spinning fear about future immigration upward spirals, earlier this week they got you all worked-up. The media is still being feed spin articles from those that have invested interets in a bull housing market and the buy to let industry.
planning4acrash said... You are correct here, the Labour government do know what is going to happen. The Tories set Labour up because the Tories did not want an election and carry the can, they wanted Gordon Brown to take the blame and fall on his sword. Now Starlig Brown has placed Goulag Darling between the rock and the hard place by stealing the Tory tax cut plans. Darling will end up lothing Brown and keep him awake all night by playing loud rock music in No 11. It is sure that they will have many altercations possibly even violent.
Tenants have the solution to correct the outrageuus house prices in their hands, take industrial action and Rent Strike.
16. Jonb said...
Downwave. A source who doesn't want to be named tells me that the Insolvency Service have a policy of not accepting rent payments in respect of bankrupt landlords as this would mean assuming landlord responsibilities to repair the place and so on. Seems that mortgage cos of repossessed houses take the same approach, for the same reason.
So what happens in practice is that you get to stay in the place rent free for a few months before you are kicked out.