Sunday, Dec 23, 2007
Very bearish article
S Times: Beat buy-to-let payments shock
'THIS was the year that buy-to-let started to crumble', '...at the Countrywide estate agency “We are noticing a growing number of landlords are opting to sell their property rather than relet.” ', 'The situation could get worse next year when about 250,000 buy-to-let loans will be up for renewal. '
Posted by financial planner @ 09:25 AM (646 views) Add Comment
12 Comments
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1. Cheekie Charlie said...
" but values of units in some city-centre developments have plummeted by as much as 35%."
Can't we parcel these losses up in a SIV and sell them to some other country??
2. Falls In 08 said...
Good article with some actual numbers researched for a change, too many journalists are lazy and pour out comments that either don't have numbers to back them up or if they do they don't add up.
A big wake up call coming next year for alot of people.
It's always been trolled about that prices soon recover and most BTL'ers wouldn't sell, but it would take some nerve not to be rushing for the exit right now when potentially faced with falling values, a 2-6k re-mortgaging bill every 2 years for each property and the likely increase of £1-200 per month on each properties mortgage.
They say rents will increase, but if I was a landlord now that was going to sit tight and my sitting tennant refused to pay a rent increase, I think I'd be a fool to argue as a potential void period could well be the straw that breaks the camels back.
Rents I believe are already way in excess of what the going rate should be, given costs of living and average wages etc.
3. uncle tom said...
Good piece, but it misses some important details:
Firstly, most BTL landlords need to release equity when they re-mortgage to cover the shortfall between their net income and the mortgage interest - now they are faced with the prospect of having to pour cash in instead. This equity release also provided cash for new purchases. Even if they wanted to buy more property now, many, possibly most, will be unable to raise the necessary deposit.
Secondly, there is no doubt that the rental figures put on BTL mortgage application forms have previously been more aspirational than realistic.The desire of all parties to get the deal sewn up resulted in some blind eyes being turned to inconveniant details.
The surveyors and lenders are more wary now, and may well demand to see evidence of the rent actually being received, when BTLers seek to re-mortgage.
My guess is that a great many of the BTLers who have fixes ending next year will not re-mortgage, and either sell the property or suffer their lender's standard variable rate..
4. jack c said...
Uncle Tom – good points - and to add to the ones you have made, those looking to re-mortgage their BTL deals might be hampered by (A) Prospect of the valuer “down valuing” for re-mortgage purposes (B) much tighter rental assessment (C) Assessment of their own income to cover short or long term rental voids.
So as you say they may well end up on the lenders Standard Variable Rate (SVR) which invariably will mean increased monthly payments and this in turn makes BTL less attractive.
5. uncle tom said...
Jack,
As you rightly note - even a small fall in house prices will not only give BTLers a capital loss, but will also snare them into paying the punitive SVR rate.
I notice that some BTL mortgage lenders have a special category of SVR that is just for the BTL crowd - could they be preparing a sting operation??
6. jack c said...
UT – another interesting point you raise and to expand upon this, BTL lenders have different SVR’s for customers based on maximum LTV – I won’t name specific lenders on here but as an example 6.39% is available @ 75% LTV compared with 7.49% @ 85% LTV which is more than a 1% differential. So falling prices or a “down valuation” will have a big impact on financial viability.
Lets be honest the big attraction with BTL has been the potential of capital growth from the property – strip this out and people will rapidly be looking for an alternative get rich quick scheme.
7. financial planner said...
RICS - highest no. of selling of BTLs which previously were for rent. (Supply > demand) + high IRs + strict lending = crash. About bleeding time, if you ask me. Thed VIs have kept the party going for longer than I and many others imagined. Reap as ye shall sow.
8. Buy It , Rent It & Let Some Poor Sap Pay The Mortgage said...
Maybe - but personally I'll be hiking my rents to cover the shortfall. Some poor sod's got to pay my expenses, and as far as I'm concerned that ma as well be the tenant. Like the article points out, most of us BTLs will simply pass on the costs to the tenant - job done!
9. it_is_going_with_a_bang said...
Lenders think thee will be no growth???
May just aswell say Lenders think there will be a drop in house prices.
Still can't quite mutter those words... yet.
10. crash bandicoot said...
Buy it et al,
You may want to start being nice to your tenants, you need them more than they need you. Nice bit of bravado though.
11. renting2 said...
Hi Buy it Rent it etc,
You might find a lot of tenants start challenging large unreasonable rent hikes through the courts. After all your investment is not their concern, it's where they live. This is the trouble with this latest type of BTL, the tenants get treated as sub-human by money grubbers.
12. Duncan said...
Another nineties memory from me.
Having bought a house I hated (noisy neighbours) it toook me TEN years before I could
sell it and get my money back. A friend who was renting a flat decided he would like
quieter neighbours. Within ONE WEEK he had found himself somewhere nicer and moved !
I hope all the Buy to Letters flats have good sound proofing.
- Duncan