Thursday, Jan 22, 2009
The latest plan being hatched to prop up the BTL market
Moneymarketing: Lenders set to be landlords to curb repos
Lenders are likely to become landlords by buying up distressed properties in an attempt to halt repossessions and stop house prices falling, according to leading valuations firm eSurv. Director of business development Richard Sexton says a number of lenders are close to launching such a proposal particularly, but not exclusively, with buy-to-let mortgages. Sexton says: "A number of lenders are considering creating extra company vehicles which will purchase repossessed stock and manage them as rental portfolios until such time as the market allows for a disposal at a better price and offering finance against repossession stock to improve marketability.
Posted by jack c @ 11:35 PM (577 views) Add Comment
10 Comments
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1. jack c said...
Here's another bit of Government interference to try and halt the slide
Northern Rock will make some significant rate reductions across its product range with effect from tomorrow, Friday 23 January 2009 .
Fixed rates reduced...
2 Year Fixed rates start from just 4.19%
5 Year Fixed rates start from just 4.79%
2. str 2007 said...
Well well Jack re: the article, it doesn't seem long since we were discussing this very thing, all though we were mainly discussing new builds and builders keeping building.
Rents could be coming down then.
Truth is this seems a very obvious move to make and could be one of the things that does put a floor under prices.
They talk re: BTL landlords though and if good cashflow is in place running that property until the market is better. The BTL houses with good cashflow though won't be the ones that get repo'd. (unless they're part of a bigger repossessed portfolio I guess).
Re: the NR rates, these are for regular or BTL mortgages ?
And what level of deposits do they require ?
And the arrangement fees ?
3. honest valuer said...
Yes it may well put a floor under values but it will also push back the timeframe for price growth by years ie. expect years of 0% price growth.
4. Crunchy said...
Will this not make lots of cash strapped homeowners, never ending council tenants.
Nationalised banks?
5. drewster said...
How will the banks account for these RTL (Repossess-To-Let) properties on their balance sheets? Will they be valued at purchase price or at actual market price? Will the BoE be willing to accept RTL assets as collateral for BoE lending? What happens if the tenants move out, or will they still be tied to the property like the homeowners they were?
This entire proposal is vague, there's no detail and no evidence of anything having been thought through.
6. beartil2010 said...
So the bank overvalues the property, lends money to you that they create from thin air, then they take your house and keep it now instead of having to sell it at market rate, so they can hide the value loss?
Sheesh...
7. str 2007 said...
drewster & beartil2010
You high light 2 very valid points, this needs to be out in the open and discussed properly.
As you say there is the potential for very devious accounting practices here.
Further, if the homeowner can't keep up interest only repayments, how will they keep up rent.
I think the above article actually points towards tenants who's landlords have been repossessed.
8. inbreda said...
I'm with drewster @4 - I don't see how this can work. If ti helps tenants then fine. Theoretically landlords whose tenants haven't moved out or stopped paying won't be repo'd anyway.
I don't think this will put a floor under prices because I'm not sure it will be classed as a sale. The ones that will be classed as a sale will be those where the tenant stopped paying, the landlord got in trouble, the property was repo'd and sold at auction. The prices are set at the margins, and none of the other problems have gone away. Besides - even if it does put a floor on prices, I don't mind so much if it helps tenants of dodgey landlords. So long as the BTLer loses the shirt on his back, I'm fine with that.
9. I Want A House said...
Council housing of the future one Labour buy up all the banks with our magical deep pockets.
10. Mbhunts said...
I Hope this idea at least keeps people in their homes if they cannot keep up the mortgage payments. On the other hand I think this will easily help some way to bringing down rental prices even further. So this could be a great idea, as a renter I look forward to this happening. I am already thinking of upsizing into a rental home with four bedrooms instead of three there are loads in the paper that people can't rent out to anybody at the moment. This idea above will only slide the rents down further, unless there is total unscrupulous lending practices for lenders to be able implement this scheme they will lose money from the onset, and potentially default themselves.....oh I forgot if you are part of the UK establishment it does not matter if you default the Government will always bail you out, ,moral hazard springs to mind....get on with this idea less rent for me to pay in the future as I don't own a home.... less tax for the tax man as rental incomes drop......greater public deficit......lets go on and on and on and on, lets face facts house prices will continue to drop they need to and we all need to accept it, messing with this now natural mathematical phenomenon will only prolong economic recovery.