Saturday, Mar 06, 2010
They are the figureheads of the £150bn blown by banks on buy-to-let they were simply the actors
Guardian: Buy to let: Why the Wilsons are not the villains
Did they and their fellow property speculators ramp up house prices beyond the reach of normal folk? Yes. Did they pocket large sums of money through borrowing and leverage, rather than producing something of industrial or social value? Yes. Did they foster a culture in which houses weren't for living in but gambling on? Yes.
But though they are the figureheads of the £150bn blown by banks on buy-to-let they were simply the actors, rather than the directors, of this show.
So, it is the banks not the Wilsons who surprisingly together with their lenders are not being investigated by the Office of Fair Trading to have and keep manipulating the local Ashford housing market.
Posted by mander @ 07:00 PM (1343 views) Add Comment
24 Comments
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1. little professor said...
The linked page is Patrick Collinson's editorial on the subject, click here for the articles in question:
Buy-to-let king and queen dismantle property portfolio
Buy to let golden rules: 'Avoid large families and flats in northern cities'
Some extracts:
"We asked for a meeting with our lenders. I said, if you think you can run the show better than me, you can have them all back. They said no. They were determined that we shouldn't go under. If we went under, then everyone went under."
Every month the couple have to meet huge repayment commitments. They don't disclose their total borrowings, which are spread across many institutions, but say that for one lender alone, Mortgage Express, their monthly payment is £353,000. Mortgage Express was part of Bradford & Bingley, one of the banks whose loans are now in the hands of the taxpayer. So we all own a share of the Wilsons' properties.
"We were going to be, to put it bluntly, stuffed. The reason we were saved was the drop in interest rates," Fergus says. He is now paying an average of just 2% interest. "I earn a yield from rents of around 5% and pay 2% in interest. The average mortgage cost is about £300 per month with £800 income. This gives about £300 per unit per month after paying agent and repairs etc. The renting game has never been better. I do not have one house available to rent."
Once the base rate goes above 3.5%, the cost of servicing their mortgage debt will begin to exceed the rental income. Judith says: "Interest rates are not going to rise quickly. If they do, then the whole country is bust."
"We are in no hurry to sell. Lots of the vultures are trying to persuade us our properties are not worth what we think they are. But we don't need to sell for financial reasons," Fergus says.
The Wilsons' decision to sell their properties has dismayed officials at Ashford borough council. They fear a flood of evicted tenants at a time when the waiting list for council houses is already lengthy. "Your business decision to sell your portfolio of properties in Ashford, Shepway and Maidstone obviously will have an effect on the stability of the housing market," Tracey Kerly, head of Ashford's housing department, said in a recent letter to the Wilsons, in which she begged for a "staggered serving of notices" on tenants "to give us some time to prepare options with future families that may become homeless".
2. little professor said...
As a bonus you also get yet another photo of the Burberry-suited dolts:
3. paul said...
Seriously, Brown's economic climate has enabled dullards like these to prosper, including in the last couple of years when interest rates were nailed to the floor to protect their interests.
If you want a posterboy and girl for the idiocy of the economic climate that New Labour has created, these are them. They created no economic value. They *actually did* nothing. They simply rose the wave of cheap credit.
And they are still being bailed out, by us, through our central bank.
Why?
WHY?
4. little professor said...
It's petty to get political about this, Paul. Interest rates were set by the (supposedly) independent Bank of England, and were in line with developed countries all around the world, all of which kept interest rates at suppressed levels and most of which were not being run by Brown.
You could equally make the argument (as Collinson does in the above editorial) that it wasactually the Tories that allowed dullards like these to prosper, by introducing Assured Shorthold Tenanciess which swung the pendulum far in favour of landlords rather than tenants rights, and the reduction of CGT for second properties, benefiting landlords with multiple properties rather than residential homeowners. The prosperous landlord class was traditionally courted by the Tories rather than Labour.
Don't get me wrong, I hate both parties with a passion. But this simplistic personification of "Brown's Britain" as if it is just one person who is responsible for all our woes is puerile and lowers the debate to a cartoonish level, while failing to address the fundamental problems with our system that led to this collapse.
5. alan said...
I agree with LP.
If IRs went back up, these people would be toast - along with scores of other BtL barons. The problem in doing that (for labour or conservatives) is that the resulting bankruptcies would expose the weaknesses in bank lending policy over the last 6 to 8 years and force another crisis.
I think that in a short while, world interest rates will rise, then it will get nasty for the UK.
6. Cashrichassetpoor said...
@4 Little professor
It's petty to get political about this, Paul. Interest rates were set by the (supposedly) independent Bank of England, and were in line with developed countries all around the world, all of which kept interest rates at suppressed levels and most of which were not being run by Brown.
You're correct Brown didn't set interest rates. However he did tell the BoE the target of keeping CPI at 2%, rather than RPI which takes into account some of the housing costs.
It was clear in 2003 at the latest if not before that the housing market was running away and was being fed by cheap credit. Brown should have stepped in and re-evaluted his economic policy to stop this.
7. markj69 str05 said...
IR's will have to rise, and way before we emerge from this mini depression. I agree alan, 'it WILL get nasty'. I wouldn't be surprised if there are a lot of wealthy people in 'chav' suits being protected, not just the gen'pub', and fraudulent banks.
Can't wait for the G/election and months following it. It's going to be very interesting.
8. britishblue said...
LP @4 Brilliantly put.
9. house said...
@4, LP I agree.
I read with great interest all of the contributions made by many. Many are expecting the interest rate to rise in a very near future.
IMHO this is not going to happen before or after the election. The reasons are simple, they have already been mentioned by various contributors ie.to prop up failing business models (if you can call them businesses).
The only time the interest rate may have to rise is when the £ takes a dive in the currency market (ie. when it drops to an acceptable level by the authorities, it could be parity with the dollar before any action is taken) and all other avenues have failed to prop the £, then and then only will the interest go up.
I could be wrong.
Does anybody agree with what I have said ?
10. letthemfall said...
Blaming Labour for everything is pointless but a favourite one on this site. All this valueless entrepreneurship dates back to 1979 and the beginning of the offerings in public companies. I remember lots of people (including students would you believe?) flipping shares in British Gas, Rolls Royce and the like. Labour, to the dismay of many of us, has allowed what amounts to destructive speculation to continue.
What I thought was most interesting about the article was how the v low interest rates saved the Wilsons. Clearly the reason prices have bounced has a lot to do with the unprecedented lows.
house: I often wonder. I think you're right that they won't rise before the election. After that I've no idea. A big fall in the £ might well force them up, though these are such strange economic times it seems almost anything could happen.
11. nomad said...
Alan@5. "I think that in a short while, world interest rates will rise, then it will get nasty for the UK."
Aussie base is up to 4%.
12. stillthinking said...
I don't think interest rates will rise, as stated if they do the UK is bust. At the same time we have a trade deficit, so.....
We will have internal deflation and a falling currency. No two ways about it. The only alternative is outright currency debasement.
Pound is going lower, lower...
13. vacuouspolitician said...
Nobody knows if IR will go up. I would suspect it will be some time before they rise and they will only rise by the smallest margins. We are in totally new territory and 'normal' economic rules have become virtually redundant and records have been well and truly smashed. If we are looking for guidance and help from the BoE - forget it. Penfold and his cronies are absolutely clueless. They just lumber along from month to month and are keeping their fingers crossed that the 'commoners' don't suss them out. They have no direction because they are still operating in the old world. The new world is run by the banks and financial institutions and they have hoodwinked the likes of Penfold into repairing their crooked business models at the expense of the 'commoners'. Ordinary people will pay this heavy price.
Time for people to wake up and be on the ball and poised - only YOU can look after YOUR own interests.
As for New Labour/Brown etc they are continuing with the system that started some considerable time ago...
14. alan_540 said...
House @8... I'm wondering if the pound will be allowed to reach parity with the euro to enable us to join euroland. The difficult decisions will then have to be taken by Brussels and the government of the day won't have to make nasty cutbacks. "It's not our fault gov' they made us do it."
15. alan_540 said...
letthemfall @9..."Blaming Labour for everything is pointless but a favourite one on this site"
It's good fun though!
Don't you think Gordon Brown looks like the dog from the Churchills adverts?
16. alan_540 said...
This couple are not the cause of our problems, they just did what every other buy to letter did but took it to the extreme. Should they have been able to do what they did? No. But don't blame them, blame the system that facilitated their greed. The mess we're in can be boiled down to that one word. Labour should be ashamed of what they've allowed to happen.
17. house said...
@13 Alan_540
I always thought that the day would come when the £ will equal Euro before we join the Euro. Now the day may have come and you may be right. Time will tell. I expect the £ to devalue quite a bit, perhaps another 20% against the dollar at least over the next few years as I do not expect things to improve in this country for someime to come. Everybody has to bear the pain and cutback accordingly.
18. markj69 str05 said...
Ever thought that a devaluation in the £ and Euro against the $, might just be the start for a combined world currency? Scary eh? But there's been a lot of scary things happening.
19. taffee said...
house.....hedgefunds are shorting the pound to force interest rates higher...they are probably twinning the trades...short pound,long interest rates
20. house said...
@18 Taffee
I am sorry I do not quite understand the shorting of currency and stocks in the financial markets although I do not the understand basic idea's in the financial markets.
Can you please if you can explain what shorting actually means. Are they are betting pounds at the lower value in the future ?
Your comments would be appreciated.
21. taffee said...
hedgefunds are selling the pound does not mean they are actually selling pounds they have in the bank...they place bets via 'puts' which are contracts betting the price of sterling falls
an simple example is,I can sell shares in say lloys of share I do not own with the view to the sp falling...I have to buy the shares at some point to close the trade.
say I sold 10,000 shares of a company worth £1 and it dropped 10% then to buy the shares I sold(which I never owned) would only cost me £9,000 banking me £1000...in reality its a bet,howeber the people taking the bets may well ultimately sell pound assets the hedge the position...its no different to shares going up or down just with bigger bets...george soros forced the uk out of the erm by the same method
22. house said...
@20 taffee
Thank you for your input. I have got a rough idea what is going on. You hope that when the time comes you have they appropriate £'s or shares to sell otherwise you would be in breach. I am sure there are safeguards to cover these bets.
23. taffee said...
yep...when something goes down something else goes up...thank why its a zero sum game...could be anything
24. Grizzly Bear said...
I'm not sure that vacuouspolitician is correct, I suspect the current conditions are deceptive and just a temporary respite.
I do blame Labour and all the major (Socialist) parties, any of them could have moderated the excesses without storing up debt, even to the extent of currency controls, to prevent foreign credit/debt distortions!
I suspect a (double) top in share prices could signal a further descent to the bottom, and all that entails; the seemingly shallower descent maybe just a stretched out descent into Depression, due to all the Worlds governments panicing and doing something (bad); IMHO I still think they should have done little or nothing, but use of receivership/bankruptcy, and help for depositors and debtors. The bank shareholders and bond holders should have paid the price for allowing banks to misbehave, that way the whole market would have pay more attention to the management of their investments, and we might have more solvent banks, and not seen the re-emergence of casino 'investment' mentality, and it's consequences!