Saturday, Dec 15, 2007
Front page shocker for indebted buy to letters
Financial Times: FRONT PAGE - FIRST SECTION: Buy-to-let financing evaporates
Well, the figures speak for themselves, amazing!! What this means is, that sub-prime BTL won't have access to the market or be able to refinance at the end of teaser rates, putting them into standard variable rates, at the fate of LIBOR rates and risk premiums. Its absolutely amazing how fast this is unravelling. Much quicker than 1992 and you can see that BTL is a big reason for that.
Subprime buy-to-let mortgages, which cater for investors with blemished credit records, have virtually ceased to exist. There are now only 18 available in the market for such borrowers compared with 1,383 five months ago, according to Moneyfacts. For prime borrowers, the number of products has dropped from 2,265 in July to 1,724.
Posted by planning4acrash @ 06:18 PM (669 views) Add Comment
12 Comments
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1. confused76 said...
FT REPORT - WEEKEND MONEY: Novice buy-to-let investors squeezed as market cools
By Sharlene Goff
Financial Times, Dec 15, 2007
Amateur buy-to-let investors who entered the market to catch rapidly rising property prices are starting to sell up rather than endure sharply increased mortgage costs and uncertain house price forecasts.
Some professional landlords are also reducing the size of their portfolios in the expectation that prices will fall early next year.
http://search.ft.com/iai?referer=http%3A%2F%2Fsearch.ft.com%2Fsearch%3FqueryText%3Dbuy%2Bto%2Blet%26x%3D0%26y%3D0%26aje%3Dtrue%26dse%3D%26dsz%3D&queryText=buy+to+let&y=0&location=http%3A%2F%2Fsearch.ft.com%2FftArticle%3FqueryText%3Dbuy%2Bto%2Blet%26y%3D0%26aje%3Dtrue%26x%3D0%26id%3D071215000262%26ct%3D0&aje=true&ct=0&id=071215000262&x=0
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2. confused76 said...
Yeah but they are in "upbeat mood" like the first class passengers of the Titanic
Buy-to-let landlords in upbeat mood
By Jane Croft, Retail Banking Correspondent
Published: December 13 2007 02:43 | Last updated: December 13 2007 02:43
Most buy-to-let landlords plan to increase their property portfolios or leave them untouched in 2008, according to a new study.
The report from the largest buy-to-let lender Bradford and Bingley, which questioned 3,867 landlords, appears to shrug off growing concerns about the impact of the credit squeeze that has made it more expensive for investors to get a mortgage.
http://www.ft.com/cms/s/c1ed3cee-a907-11dc-ad9e-0000779fd2ac,Authorised=false.html?_i_location=http%3A%2F%2Fwww.ft.com%2Fcms%2Fs%2F0%2Fc1ed3cee-a907-11dc-ad9e-0000779fd2ac.html&_i_referer=http%3A%2F%2Fsearch.ft.com%2Fsearch%3FqueryText%3Dbuy%2Bto%2Blet%26x%3D0%26y%3D0%26aje%3Dtrue%26dse%3D%26dsz%3D
3. voiceofreason said...
"...because lenders had valued the property at less than the asking price."
Ho ho, even the lenders can see that prices are dropping.
Also, "There are now only 18 (sub-prime BTL mortgages) available in the market for such borrowers compared with 1,383 five months ago,"
I have already noticed a sharp drop in the number of football-hooligan type skin-head blokes driving around Southampton in top of the range new Range Rovers.
Maybe, just maybe our hard earned wages will be worth something again soon.
Removing 850,000 BTL mortgages a year from the UK market will certainly increase supply of property.
4. planning4acrash said...
Muahahahahahahaha!!!!
5. Sinewaveboy said...
Why is it that NOBODY seems to get the importance of the drop in Loan-to-Value ratios?
With a £25k deposit, an LTV of 95% (a la Northern Rock) allows someone in theory to buy a £500k house.
With the same £25k deposit, but an LTV of 80%, the same person can only take out a mortgage of £100k, meaning they can only afford a £125k house. THAT'S 75% LOWER!!!
And I read that LTV's of 75% or even only 70% are now common.
WHO GIVES A DAMN ABOUT INTEREST RATES WHEN LTV'S ARE THE REAL ISSUE. DE-LEVERAGING IS THE WHOLE DARN POINT AND NOBODY GETS IT!!!!!
6. Tiggerthetiger said...
Truly amazing........truly amazing..............I am three weeks away from signing contracts...(selling) geesh I hope my buyer follows through !!! I discounted my house compared to all around me (fingers crossed)
All those BTL`rs have ruined their future,because of that pot of gold at the end of the rainbow....they obviously have never chased a rainbow before ???
7. This comment has been removed as it was found to be in breach of our Blog Policies.
8. drewster said...
@Sinewaveboy,
You're quite right, most people don't understand the importance of leverage in the whole system. Right now the banks are engaged in a flight to safety - hence the subprime loans being withdrawn from the market. Lower loan-to-value ratios are an important part of reducing their risk. On the way up, every investor was told (correctly) that a 5% price rise in a 95% LTV property means a 100% return on investment. Little was said about how a 5% fall is a 100% loss.
The incredible thing is that banks are willing to lend for Buy-to-Let. They aren't falling over themselves to lend money to share investors - if you ask for a mortgage to buy £100,000 of shares you'd be laughed out of the branch! Banks justify BTL on the grounds that house prices are more stable than share prices, but we'll soon find out if that's really true!
Hyman Minsky defined three stages of the financial cycle: hedge finance (paying your mortgage), speculative finance (paying your mortgage interest only), and Ponzi finance (paying your mortgage interest with your mastercard). I suspect quite a few BTL investors with empty city-centre flats are paying the mortgage with their credit cards.
9. techieman said...
Drewster / Sinewave boy - Agreed. Its the same as when you buy shares on margin, and i thought it was pretty obvious. Infact its so bloody obvious that it makes you wonder why they are doing it. Obviously it will mean a contraction in the market and falling prices which will then cause more default and repos, misguided people handing the keys back (misguided in the sense of thinking that will absolve them from loss). All of this is the very opposite of what the lenders really want. When one company lowers LTV thats them withdrawing market share and therefore lowing risk (commended) .Trouble is when they all do it t the same time (due to systemic risk) then the picture you paint is correct! The interesting point you make is if they did this scaled up (e.g after a few years of the bull lowered the LTV) the excesses might have been averted. Instead what did they do? -125% of Valuations to secure market share. Market share of a bubble market?!?! You can see why they did it but should we excuse them and give them 7 figure redundancy packages?
10. techieman said...
Drewster you can buy shares on margin they are called futures or you can use spread betting. in effect you are controlling large nominal values without having the nominal. Effectively the same as the mortgage, its just the market is more liquid and you can trade out with a profit or a loss much more quickly.
11. voiceofreason said...
techieman, what was even more amazing was the journos who kept talking about "BTL rental yields causing concern by being lower than IR on a savings account".
Thus totally missing the point that with no deposit (125% LTV for flip's sake) and cap growth as the main goal, BTL is a derivatives trade on property. Nothing to do with yields.
Lost count of the number of times I tried explaining this to journos without success.
12. techieman said...
VoR by name and nature!!!